UPI MDR from October 15: What happens to auto-debit payments for mutual funds, insurance and OTT subscriptions?

The introduction of Merchant Discount Rate (MDR) on select UPI transactions will not affect automated recurring payments such as mutual fund SIPs, insurance subscriptions, utility bills or OTT streaming services, as payments made through UPI Mandates or AutoPay will not carry the prescribed MDR transaction charge.

UPI is set to enter a new phase of its evolution from October 15, 2026, with the introduction of a Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) transactions above ₹2,000. Under the new framework announced by the National Payments Corporation of India (NPCI), merchants will pay an MDR of 0.4% on eligible transactions, while payments of ₹75,000 and above will be subject to a maximum charge of ₹300 per transaction.

The new framework, however, does not mean that every UPI payment above ₹2,000 will attract an MDR. The government's clarification specifically excludes automated recurring standing instructions, known as UPI Mandates or UPI AutoPay, from the prescribed MDR charges.

What happens to mutual fund SIP auto-debits?

For mutual fund investors, the distinction between a recurring UPI mandate and a regular UPI payment is important. A mutual fund SIP or other recurring investment set up through UPI Mandate or AutoPay will not attract the prescribed MDR transaction charge.

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This means investors who have authorised automatic monthly transfers for their SIPs can continue with their recurring investments without an MDR being imposed on the AutoPay transaction.

At the same time, capital market transactions made through UPI have been assigned a separate, concessional MDR category.

The MDR for capital market transactions, including payments towards mutual funds, securities, stockbrokers and dealers, is set at 0.02% of the transaction value, subject to a maximum cap of ₹300.

The special category covers regulated entities such as asset management companies (AMCs), SEBI-registered stockbrokers, securities dealers and investment platforms. It applies to UPI fund transfers for equity purchases, debt market investments, mutual fund purchases and broker wallet top-ups.

Therefore, a one-time UPI payment for an eligible capital market transaction can attract the 0.02% MDR, while a recurring investment processed through an automated UPI mandate remains outside the prescribed MDR framework.

What about insurance premium payments?

Insurance premium payments have been given a separate MDR concession.

For insurance premium payments above ₹2,000, a flat MDR of ₹5 per transaction will apply instead of a percentage-based charge. The concessional rate is aimed at keeping digital collection costs low for high-value annual or semi-annual insurance payments.

OTT subscriptions and utility bills remain unaffected

Consumers using UPI AutoPay for monthly utility bills, OTT streaming subscriptions and recurring investments will not pay any prescribed MDR charge on those automated recurring transactions.

The important distinction is therefore not merely the transaction value, but also the type of payment and the mechanism through which it is processed. The new MDR regime applies to specified P2M transactions, while automated recurring UPI mandates remain outside the prescribed MDR structure.