Zerodha founder and CEO Nithin Kamath on Thursday, 9 July publicly criticised rival fintech platforms on X after Groww — one of India's largest retail brokers by active users — began offering regular mutual funds through its subscription service Groww Prime. The remarks reignited a long-running debate in India's discount brokerage industry over whether platforms that once championed direct mutual funds are quietly abandoning that promise.

What Kamath Said

In his post on X, Kamath observed that many platforms which launched direct mutual fund offerings around the same time Zerodha introduced its Coin platform have since 'disappeared or pivoted to something else.' He said remaining competitors are 'rethinking their choice of offering direct plans,' before adding that 'Zerodha will continue to offer direct mutual funds for free.'

Kamath also pointed to the company's founding philosophy, which dates to when it pioneered the discount brokerage model in India in 2010. 'When we started the discount brokerage model in India in 2010, we decided to charge the same fee regardless of trade size. The logic was simple: if the effort to execute a trade is the same, why should customers pay differently?' he said.

Groww's Pivot to Regular Funds

Bengaluru-based Groww had historically positioned itself as a direct mutual fund platform, marketing the model as a low-cost investment option that eliminates distributor commissions and generates better long-term returns. The company has now expanded its product mix to include regular mutual funds under Groww Prime, its subscription-based service. The product was initially rolled out to a select group of users earlier this year before being extended to the company's full two-crore customer base.

The Direct vs Regular Fund Debate

The distinction between direct and regular mutual funds is significant for retail investors. Regular plans carry distributor commissions — typically ranging from 0.5% to over 1% annually — which are embedded in the expense ratio and reduce net returns over time. Direct plans eliminate this cost, making them structurally more efficient for long-term wealth creation. Kamath reinforced this argument: 'You can't call yourself a discount or a low-cost broker if you charge a percentage fee on transactions, because there's no incremental effort in executing a larger order.'

Notably, this is not an isolated shift. Several fintech platforms that initially built their user bases on a direct-fund proposition have gradually introduced regular plans as they seek new revenue streams amid rising operational costs and pressure to achieve profitability.

Kamath's Call to Action for Investors

Beyond the competitive jab, Kamath urged retail investors to audit their own portfolios. He advised customers to check whether they are holding regular mutual funds and said Zerodha would assist those who wish to switch from regular to direct plans. This is a meaningful offer given that switching typically requires redemption and reinvestment, which can have tax implications depending on the holding period and fund type.

What This Means for the Industry

The episode underscores a broader tension in India's fast-growing retail investment ecosystem: the conflict between user-acquisition economics and the low-cost ethos that originally differentiated discount brokers. As platforms scale to tens of millions of users, the commission income from regular funds becomes an attractive and relatively frictionless revenue line. Whether Groww's move triggers a wider industry re-rating — or pushes regulators to revisit disclosure norms around subscription-bundled fund products — remains to be seen.