Merchant discount rate (MDR) of up to 0.4% on UPI person-to-merchant (P2M) transactions over ₹2000 will become effective from October 15, 2026. The National Payments Corporation of India (NPCI) made this announcement through a circular dated September 15, 2026.
The MDR is not payable by customers. Rather, it will be paid by merchants. This means, there will be no direct impact on customers making various UPI payments.
“UPI services will continue without any cost to consumers. Consumers can continue to transact free-of-cost using UPI as they have been doing till now,” the Department of Financial Services (DFS) under the Ministry of Finance said.
The DFS further said that scanning QR codes at local markets, street vendors, or small retail shops will also remain completely free for consumers. “The customer-facing side of a QR transaction involves zero fees, regardless of the purchase amount,” DFS said.
The above means individual account holders can continue using UPI applications for all routine, daily expenses without worrying about any charges.
UPI MDR: Impact on SIP transactions
If you have set-up UPI mandate or autopay for mutual fund SIP subscriptions, you don’t have to pay any MDR transaction charges. This applies to UPI mandates for utility bills as well as OTT subscriptions.
“No, automated recurring standing instructions, known as UPI Mandates or AutoPay, do not carry prescribed MDR transaction charges. Payments set up using automated recurring transfers for monthly utility bills, OTT streaming subscriptions, all recurring investments etc. will not pay any prescribed MDR charge for the transaction,” the DFS said
UPI MDR: Impact on Insurance premium payment
For insurance premium payment, policyholders will not have to pay any MDR charges. However, insurers accepting the premium payments will be paying a flat MDR of ₹5 per transaction on payments exceeding ₹2000.
“This concessional model ensures that policyholders making high-value annual or semi-annual insurance payments do not face
heavy backend fee friction. Insurance companies benefit from low-cost digital collections, helping expand insurance coverage across India,” the DFS said.
UPI MDR: Impact on fuel purchase at petrol pumps
At petrol pumps also, customers will not have to pay any MDR charges. However, petrol pumps accepting UPI payments above ₹2000 will pay a flat fee of ₹5.
“The flat ₹5 fee protects petrol pump operators from high processing fees on tank refills. For all fuel payments under ₹2,000, the MDR remains at 0%, ensuring everyday commuter refuelling is completely charge-free, while fuel station operators are not subject to any MDR on such transactions,” DFS said.
UPI MDR: Impact on utility bill payments
Utility bill payments also qualify for a flat concessional MDR of ₹5. While customers are not required to pay this MDR, bill collectors will also not need to pay any MDR is the amount collected is less than ₹2000.
“Public utility payments such as electricity distribution, municipal water charges, and piped natural gas fall under designated Industry program category. For utility bill payments exceeding ₹2,000, a flat concessional MDR of ₹5 applies, rather than a 0.4% variable rate.
Utility transactions under ₹2,000 carry zero MDR. This framework ensures state utility boards and municipal corporations can digitize bill collection without incurring high processing fees, keeping public utility services affordable.”
UPI MDR: Impact on stock and mutual fund investments
Investors are not required to pay any MDR to stock market or mutual fund platforms.
However, according to DFS, there is a MDR of 0.02% of the transaction value with a maximum capping of ₹300 for capital market transactions, including payments for towards mutual funds, securities, stock brokers and dealers. This MDR will apply to fund transfers executed via UPI for equity buying, debt market investments, mutual fund purchases, and broker wallet top-ups.
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