‘Running a broking firm is a tough job,’ Zerodha founders Nithin, Nikhil Kamath express concerns over regulatory laws

Nithin and Nikhil Kamath, co-founders of Zerodha, are urging startups, regulators, and the government to work more closely together to drive innovation. While acknowledging positive regulatory changes in India’s startup environment, the duo warned that excessive regulations could hinder growth and discourage entrepreneurship.

The Kamath brothers, along with CTO Kailash Nadh, spoke about these challenges during a special appearance on CNBC-TV18’s Young Turks Reloaded podcast at Zerodha’s Bangalore office.

Nikhil Kamath expressed concern over the “uncertainty” within the startup ecosystem. He stressed the need for a collaborative relationship between entrepreneurs and regulators. “We are subject to regulators who we don't really have any influence [with] or access to their decisions, who can reduce our revenues by 50% in one day. They can make us shut down,” Nikhil said.

Although Kamath acknowledged that regulators have made the system stronger, he warned that too many rules could suppress innovation. “In a classroom with 50 kids, where the teacher makes the rules and reprimands kids at will, will there be innovation coming out of those kids who are living in fear? Likely not,” he remarked.

Regulatory changes impacting business

Nithin Kamath echoed his brother’s concerns, pointing out that new rules from the Securities & Exchange Board of India (SEBI) would likely slow down Zerodha’s revenue growth. He cited the SEBI’s “true-to-label” circular as one example of how regulations could hurt their operations. “Running a broking firm is a tough job,” Nithin said.

Despite the challenges, the Kamath brothers remain optimistic about India’s startup scene. They believe that fostering a more supportive environment could unlock significant growth and drive entrepreneurship.

Nikhil highlighted the atmosphere of fear across the startup ecosystem. “I feel like there's a lot of fear, not just here but everywhere in the ecosystem. There are many people who are scared,” he said.

He added that a shift in mindset, where regulators, government, and entrepreneurs work as allies, could help more people take the leap into entrepreneurship. “If we can mitigate fear to a large degree, more people will go out and attempt entrepreneurship,” he explained.