Customers making UPI payments for fuel at petrol stations across India will soon see a new charge. A flat fee of ₹5 will be applied to all UPI transactions exceeding ₹2,000 for fuel purchases. This change is part of a broader revision to the Merchant Discount Rate (MDR) framework for UPI payments, set to take effect from October 15.
Understanding the New UPI Fuel Charges
The National Payments Corporation of India (NPCI), which oversees the UPI platform, has confirmed that fuel purchases qualify for a concessional rate under the new system. While general merchant payments above ₹2,000 will attract a 0.4% MDR, capped at ₹300 for transactions of ₹75,000 and above, fuel stations, along with railways and telecom services, will benefit from a fixed ₹5 fee per transaction.
For everyday refuelling, most UPI fuel payments below ₹2,000 will continue to be free of charge. This means smaller transactions, which constitute a significant portion of daily fuel purchases, will remain unaffected by the new MDR.
Broader Impact of the MDR Framework
This revised framework marks the end of the zero-MDR regime that had been in place since January 2020. That policy, while encouraging digital payments, had faced criticism from banks and fintech companies for being financially unsustainable.
Other Concessional Rates
- Capital Markets: Payments related to capital market activities will attract a lower MDR of 0.02%.
- Insurance Premiums: Similar to fuel, insurance premium payments made via UPI above ₹2,000 will also incur a flat ₹5 MDR, ensuring policyholders are not burdened by high percentage-based fees.
What Remains Free?
The Finance Ministry has clarified that the new charges will have no impact on person-to-person (P2P) UPI transactions, which will remain completely free regardless of the amount. Furthermore, merchant payments up to ₹2,000 will also continue to be free, along with transactions covered under the existing zero-MDR framework for small merchants. The NPCI estimates that approximately 96% of all person-to-merchant transactions will remain unaffected by these changes.
The introduction of these differentiated rates aims to create a more sustainable digital payments ecosystem while ensuring that essential services like fuel and insurance remain accessible without prohibitive transaction costs.