Starting October 15, 2026, the Unified Payments Interface (UPI) will introduce a Merchant Discount Rate (MDR) on specific Person-to-Merchant (P2M) transactions exceeding ₹2,000. This new framework, announced by the National Payments Corporation of India (NPCI), aims to standardize charges for certain digital transactions. However, a significant clarification ensures that automated recurring payments, often crucial for personal finance, remain exempt.
What is the New UPI MDR?
Under the new rules, merchants will pay an MDR of 0.4% on eligible P2M transactions above ₹2,000. For higher-value payments of ₹75,000 and above, a maximum charge of ₹300 per transaction will apply. This standard MDR rate applies to most general merchant transactions.
UPI AutoPay: Recurring Payments Remain Unaffected
Crucially, the new MDR regime does not impact automated recurring payments set up through UPI Mandates or UPI AutoPay. This means that mutual fund Systematic Investment Plans (SIPs), monthly insurance premium payments, utility bill auto-debits, and subscriptions for Over-The-Top (OTT) streaming services will continue without attracting the prescribed MDR transaction charge. Investors and consumers can maintain their existing auto-debit arrangements without incurring additional fees.
Special Rules for Capital Market Transactions
While recurring investments are exempt, one-time capital market transactions made through UPI fall under a separate, concessional MDR category. This includes single payments towards mutual funds, securities purchases, stockbrokers, and dealers. For these transactions, an MDR of 0.02% of the transaction value will apply, capped at a maximum of ₹300.
Insurance Premium Payments Above ₹2,000
Insurance premium payments also have a distinct MDR structure. For premiums exceeding ₹2,000, a flat MDR of ₹5 per transaction will be charged. This concessional rate is designed to keep digital collection costs low for typically higher-value annual or semi-annual insurance payments, differing from the percentage-based charge for other P2M transactions.
The key takeaway for consumers and investors is the distinction between a one-time P2M payment and an automated recurring UPI mandate. While specific P2M transactions will incur new charges, the convenience of UPI AutoPay for regular financial commitments remains free from the new MDR.