The Reserve Bank of India’s new UPI Merchant Discount Rate (MDR) regime takes effect on October 15, 2026. While the updated rules introduce charges for certain merchant transactions, many recurring payments—like mutual fund SIPs and OTT subscriptions—remain untouched. Here’s a breakdown of what changes, what stays free, and how different payment types are classified.
Key Takeaways
- UPI AutoPay SIPs and OTT subscriptions are exempt from the prescribed MDR.
- One-time mutual fund and capital-market UPI payments incur a 0.02% MDR, capped at ₹300.
- Specified person-to-merchant (P2M) payments above ₹2,000 may attract a 0.4% MDR, with a ₹300 cap for transactions of ₹75,000 or more.
Understanding the New MDR Structure
The new framework applies a 0.4% MDR to specified P2M UPI payments exceeding ₹2,000. For transactions of ₹75,000 and above, the charge is capped at ₹300. Person-to-person (P2P) transfers remain completely free, regardless of the amount. Merchant payments up to ₹2,000 are also exempt. According to the government, approximately 96% of P2M transactions will remain outside the MDR net.
UPI AutoPay Exemption: Relief for Recurring Payments
NPCI has confirmed that UPI Mandates and AutoPay recurring transactions will not attract the prescribed MDR. This includes utility bills, OTT subscriptions, and recurring investments such as mutual fund SIPs. So, a ₹10,000 SIP set up via UPI AutoPay will not incur an MDR charge simply because it exceeds ₹2,000. Similarly, a ₹2,500 monthly OTT subscription—whether Netflix, Amazon Prime, or JioHotstar—remains unaffected.
Mutual Fund SIPs: Two Different Rules
The treatment of mutual fund SIPs depends on the payment route. Recurring SIPs using UPI AutoPay are outside the prescribed MDR. However, one-time UPI payments for mutual funds, securities, stockbrokers, or dealers fall under a separate capital-market category. This category carries a much lower MDR of 0.02%, capped at ₹300 per transaction. The reduced rate is intended to encourage retail participation in formal financial markets.
This distinction is significant for brokers and investment platforms. Reuters has reported industry concerns about the impact of frequent UPI transactions on brokerage costs, and Zerodha CEO Nithin Kamath has publicly questioned whether brokers can absorb the long-term cost.
Rent Payments: Structure Matters
Rent payments do not automatically receive the same AutoPay exemption unless the transaction uses a UPI Mandate or AutoPay structure. A simple transfer between individuals remains a P2P payment, which is free regardless of amount. However, if rent is paid to a merchant or property service provider, it may fall under the P2M framework if the transaction meets relevant conditions. The official rules do not list rent as a special category, so the exact treatment depends on how the payment is structured and who the recipient is.
Customers Won’t Pay MDR Directly
The MDR is a merchant-side charge within the UPI ecosystem. The government has clearly stated that customers will not be charged a separate UPI transaction fee. Banks have been directed to prevent merchants from passing on the MDR to customers, and UPI app providers are prohibited from adding platform fees or hidden charges under this framework. A ₹20,000 eligible merchant payment, therefore, will not become a ₹20,080 debit from the customer’s account.
Still, businesses may feel the pinch. Retailer groups have expressed opposition, warning that the added cost could squeeze already thin margins. Some industry associations have also questioned the timing, given the upcoming festive season.
What Changes from October 15
Starting October 15, 2026, the following rules apply:
- Standard P2M transactions above ₹2,000: 0.4% MDR, capped at ₹300 for amounts of ₹75,000 or more.
- Railways, telecom, insurance, fuel, and agricultural inputs above ₹2,000: flat ₹5 MDR.
- Capital-market payments (one-time mutual fund, securities, etc.): 0.02% MDR, capped at ₹300.
- UPI AutoPay recurring payments (SIPs, OTT, bills): exempt from prescribed MDR.
- P2P transfers: always free.
The immediate impact on most households appears limited. The bigger shift is internal—banks, payment service providers, apps, brokers, and merchants must now adapt to a new cost landscape after more than six years of zero-cost UPI merchant payments.
Frequently Asked Questions
1. Will mutual fund SIPs become costlier under the new UPI MDR rules?
No, SIPs that use UPI AutoPay mandates remain outside the prescribed MDR.
2. Will OTT subscriptions attract UPI MDR?
No, recurring OTT payments through eligible UPI AutoPay mandates remain outside the prescribed MDR.
3. Will rent payments become costlier?
Treatment depends on the payment structure. P2P transfers remain free, while eligible P2M transactions can fall under the MDR framework.
4. What MDR applies to one-time mutual fund payments?
A 0.02% MDR applies to specified capital-market payments, with a maximum charge of ₹300 per transaction.
5. When will the new UPI MDR framework start?
The new framework takes effect on October 15, 2026.
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