The new UPI Merchant Discount Rate (MDR) framework has raised questions among users who rely on digital payments for everything from OTT subscriptions and mutual fund investments to insurance premiums, fuel and utility bills.

However, the MDR structure described in the source is not identical for every category. Different types of merchant payments have been placed under different rules, with some transactions exempt from the specified MDR and others subject to a percentage-based charge, flat fee or maximum cap.

One important clarification concerns UPI Autopay. According to the source, the specified MDR will not apply to UPI Autopay transactions. This is relevant for consumers using automatic payments for subscriptions, bills and systematic investments.

UPI MDR Rules at a Glance

Will OTT Subscriptions Become More Expensive?

Consumers using UPI Autopay for recurring subscriptions do not need to interpret the new MDR framework as an automatic charge on every recurring payment.

The source specifically mentions services such as Netflix and Amazon Prime while explaining the Autopay exemption. It also includes automatically deducted electricity and water bills and mutual fund SIPs as examples of recurring payments.

According to the source, NPCI's FAQ clarifies that the specified MDR charge will not apply to UPI Autopay.

Therefore, a recurring UPI Autopay mandate should be distinguished from a regular merchant UPI transaction when understanding the MDR rules.

What Happens to Mutual Fund SIPs?

Many investors use automatic mandates for their monthly mutual fund SIPs.

If the SIP is being processed through the UPI Autopay mechanism described in the source, the specified MDR does not apply under the stated Autopay rule.

However, the source separately provides an MDR structure for certain capital-market payments made through UPI. Therefore, an automatic SIP and a separate one-time UPI investment transaction should not necessarily be treated as the same type of payment.

How Much MDR Applies to Capital-Market Payments?

For qualifying capital-market UPI transactions, the source states an MDR of 0.02%, subject to a maximum limit of ₹300 per transaction.

The rule is described as covering payments linked to regulated capital-market entities, including asset management companies, SEBI-registered stockbrokers, securities dealers and investment platforms.

Payments for purchasing debt instruments, making mutual fund investments and adding funds to a broker wallet are among the examples mentioned in the source.

For example, at the stated 0.02% rate, a ₹1 lakh qualifying transaction would mathematically generate an MDR of ₹20, while the ₹300 ceiling prevents the charge from exceeding that maximum on sufficiently large transactions.

What Is the MDR Rule for Insurance Premiums?

Insurance payments have been given a separate structure.

According to the source, an insurance premium payment above ₹2,000 will attract an MDR described as 0.04% or a flat ₹5, rather than following the general merchant MDR structure.

The source's wording does not fully explain how the choice between the 0.04% calculation and ₹5 applies in every scenario, so it is safer not to infer a rule beyond what the supplied material states.

This category can be particularly relevant for policyholders who make relatively large annual or half-yearly premium payments.

Paying for Petrol or Diesel Through UPI? Check This Rule

Fuel transactions also have their own MDR arrangement.

According to the source, a UPI payment of up to ₹2,000 at a petrol pump carries no MDR under this structure.

For fuel payments above ₹2,000, a flat MDR of ₹5 applies. The charge does not continue increasing as a percentage of the fuel bill.

For example, based on the rule described in the source, a qualifying fuel payment of ₹3,000 and one of ₹5,000 would each be subject to the same ₹5 flat MDR rather than a progressively higher percentage-based charge.

What About Electricity and Water Bills?

Utility payments have also been separated from the general MDR structure.

The source states that payments for electricity, water and piped natural gas of up to ₹2,000 will have no MDR.

For applicable utility payments above ₹2,000, the stated MDR is ₹5 per transaction.

This means the MDR does not keep increasing with the bill amount under the structure described in the source.

Again, consumers should remember that this is a merchant-side payment-processing charge. It should not automatically be interpreted as a ₹5 surcharge that every customer must add to the amount shown on their utility bill.

What Is the MDR Rule for School and College Fees?

Education payments are another separate category.

The source lists school fees, university term fees and institutional entrance-examination fees among the transactions covered.

For education payments of up to ₹2,000, the source says there will be no MDR.

For payments above ₹2,000, it says a flat-fee or capped arrangement will apply. However, the supplied source does not provide the exact fee or cap for this category.

Therefore, an exact MDR amount for a ₹10,000 or ₹50,000 education payment cannot be calculated reliably from this source alone.

Why Are MDR Rates Different Across Categories?

The reasoning given in the source is that UPI payment patterns vary substantially across sectors.

A retail merchant may receive a large number of relatively small payments throughout the day. Capital-market, insurance and education transactions, on the other hand, can involve much larger individual amounts.

For this reason, the framework described in the source uses a combination of percentage-based MDR, fixed fees and maximum caps rather than applying the same rate to every type of transaction.

What UPI Users Should Understand

The biggest takeaway is that the MDR framework should not be read as a single charge applicable to every UPI transaction.

The source describes UPI Autopay as exempt from the specified MDR, while certain capital-market transactions have a 0.02% rate capped at ₹300. Fuel and utility payments above ₹2,000 have a ₹5 flat MDR under the stated rules, while transactions up to ₹2,000 in those categories carry no MDR.

Education and insurance payments also have separate arrangements.

Most importantly, MDR is a merchant-side payment-processing charge. Consumers should not confuse it with an automatic transaction fee that will be separately deducted every time they scan a QR code, pay a bill, invest through UPI or use an Autopay mandate.

Disclaimer: This article is based solely on the MDR rules and examples provided in the supplied source dated September 15, 2026. The source does not provide every implementation detail for all categories. Users and merchants should refer to the applicable official payment guidelines for final terms.