UPI charges from October 15: 0.4% MDR on payments above Rs 2,000, but flat rate of Rs 5 for train tickets, fuel, insurance and utilities; send money to friends and family, auto pay for OTT remains free
The National Payments Corporation of India (NPCI) on Tuesday announced a merchant discount rate (MDR) of 0.4% on UPI transactions above Rs 2,000, subject to an overall limit of Rs 300.
For utility payments, fuel purchases, insurance premiums, train tickets and various government services, a flat charge of Rs 5 will be applied.The MDR must be assumed by the merchants. Larger retailers, online platforms and restaurants, among others, may choose to absorb the cost. Meanwhile, cash transactions also involve fees, and several banks charge fees for cash deposits.The new MDR will come into force from October 15. However, UPI payments between individuals, including transfers made to friends, will continue to be exempt from the charge.
Automatic debits and UPI mandates will also not attract MDR.“Banks have been advised to ensure that merchants do not pass on MDR charges to customers. UPI app providers are expressly prohibited from imposing platform fees or hidden charges,” the Finance Ministry said in a statement.If you’re still wondering which transactions will be subject to which fee, we’ll break it down for you:
UPI Transactions: What’s Left Free
All person-to-person transactions: UPI transfers made directly between people will remain completely free, regardless of the amount involved. People will not be charged a transaction fee, platform fee or any other fee for sending or receiving money through UPI. As a result, transactions between individuals, which account for 70% of the total UPI transaction value, will remain outside the MDR framework.Payments to Merchants up to Rs 2,000: Person-to-Merchant (P2M) UPI payments of up to Rs 2,000 will not attract MDR.Payments received by small merchants: Small merchants, including street vendors, who receive up to Rs 1 lakh per month through UPI QR codes under the person-to-person (P2PM) merchant category will continue to earn zero MDR on all their transactions.
This will ensure that street vendors, corner stores and other small businesses do not face additional costs for accepting digital payments.
Fixed MDR for these UPI transactions:
Certain categories of merchants, including railways, telecom services, insurance and fuel, among others, will attract a fixed MDR of Rs 5 for transactions above Rs 2,000. Unlike the variable rate of 0.4%, these sectors will pay a fixed amount of Rs 5 per transaction, regardless of the value of the transaction.
So if you pay for a train ticket through UPI, you do not attract 0.4% MDR but 5 rupees, which again is not borne by you but by the merchant.The fixed fee structure aims to prevent transaction costs from increasing in critical public services, utility bill collection and low-margin sectors such as fuel retail. It also keeps essential consumer services digitally efficient and low-cost.
Capital Market Transactions carried out through UPI
UPI transactions related to capital market, including payments from mutual funds, securities, stockbrokers and traders, will attract an MDR of 0.02% of the transaction value, subject to a maximum charge of Rs 300.This rate is lower than standard rates applicable to commercial transactions and aims to encourage retail participation in the formal financial market.The capital market MDR category covers regulated entities operating in the capital markets, including asset management companies (mutual funds), SEBI-registered stockbrokers, securities dealers and investment platforms.The framework applies to UPI fund transfers made for stock purchases, debt market investments, mutual fund purchases and broker wallet top-ups.
By placing these transactions in a separate category, capital market payments are distinguished from regular retail purchases and payments for general services.
Insurance premiums paid through UPI are covered under a concessional flat rate structure. For insurance payments above Rs 2,000, the MDR is set at Rs 5 per transaction instead of being calculated as a percentage of the payment amount.
Fuel purchased at gasoline pumps.
UPI payments for fuel purchases above Rs 2,000 at petrol stations will attract a fixed MDR of Rs 5.
The objective of the fixed charge is to prevent gasoline pump operators from having to face higher processing costs on larger volume fuel purchases.For fuel payments less than Rs 2,000, the MDR will remain at 0%.
Electricity and water bills
Utility payments, including electricity bills, municipal water charges, and piped natural gas payments, fall under the designated industry program category. For payments above Rs 2,000, a concessional fixed MDR of Rs 5 will be applied instead of the variable rate of 0.4%.Utility bill payments below Rs 2,000 will continue to have zero MDR.Recurring auto-debit payments, such as utility bills and OTT subscriptionsAutomated recurring payments made using standing instructions, known as UPI or autopay mandates, do not incur the prescribed MDR transaction charges.As a result, recurring payments established through automatic transfers, including monthly utility bills, OTT streaming subscriptions, and recurring investments, will not incur the MDR fee prescribed in the transaction.
Education fees
Educational fee payments, such as school tuition, university fees and charges for institutional entrance examinations, are covered under the designated industry program category. Payments above Rs 2,000 will benefit from flat fee structures or limited processing fees, rather than being subject to high percentage-based charges on higher fee amounts.Education payments of up to Rs 2,000 will continue to be completely MDR-free.
