Why is Groww raising brokerage fees by 150% for small trades?

Synopsis

Groww, a major Indian brokerage firm, will increase its minimum equity brokerage charges. The increase is from ₹2 to ₹5 per order. This change impacts smaller equity trades. The new fee structure will be effective from June 21. Other brokers like Angel One previously raised their fees. These changes follow regulations impacting brokerage profits.

Mumbai: Groww, India's largest broker in active clients, is set to increase its fees by 150% for low-ticket transactions as the profitability of discount broking firms has come under pressure in the face of tighter regulations.

The firm, in a communication to clients, said it will hike the minimum equity brokerage charges to ₹5 per order from ₹2, for equity trades from June 21. The move is expected to increase the trading costs of smaller transactions. The IPO-bound firm with about 13 million active clients will charge brokerage fees in the range of ₹5 to ₹20 per trade against ₹2 to ₹20, currently.

Agencies

Other larger brokers, like Angel One, also had increased their brokerage charges from 0 to ₹20 on equity trades late last year, after the Securities and Exchange Board of India's 'true-to-label' norms announced in July last year squeezed brokerages' profits. The new rules allow brokers to levy transaction charges on clients that they would pay the Market Infrastructure Institutions (MIIs) - stock exchanges, clearing corporations, and depositories.

This has eliminated the hidden markup, which has hit brokers’ profitability. “Following the regulatory changes introduced last year, we’ve seen a notable decline in derivative volumes across Indian markets, which has had a significant impact on broker revenues,” said Ashish Nanda, President and Digital Business Head at Kotak Securities. “Sebi’s ‘True to Label’ circular further removed the rebates that previously contributed 10 to 50% of brokers’ income.”

Equity derivatives turnover on NSE declined 27% to Rs 39.5 lakh crore in March from Rs 54.4 lakh crore in September, according to NSE. Nanda said due to these pressures, many firms have resorted to price hikes as a way to offset the financial hit. After the regulatory tightening, Zerodha founder Nithin Kamath said on X: “With the new circular, we will, in all likelihood, have to let go of the zero brokerage structure and/or increase brokerage for F&O trades. Brokers across the industry will also have to tweak their pricing.”

Groww also revised the interest rates for the MTF (Margin Trading Facility) — a system that allows investors to borrow to buy shares they cannot afford —at 14.95% per annum. Currently, the broking firm charges 15.75% per annum as MTF interest for funding amounts less than Rs 25 lakh and 9.75% for Rs 25 lakh and above.

This decision will make it more expensive for the high-volume users of the MTF facility. Groww said the Depository Participant (DP) charges for clients will also go up from Rs 18.5 per day per stock (irrespective of the number of sale transactions in a stock) to Rs 20 per sale transaction “Earlier, you were charged DP charges once per stock (ISIN) per day,” said the firm in the client communication.

...moreless

...moreless