From 15 October 2026, a Merchant Discount Rate (MDR) of 0.4% applied to specified UPI payments to merchants above ₹2,000. Insurance premiums sit in a separate slab with a flat ₹5 MDR, paid on the merchant side and not by you. Premiums collected through UPI AutoPay carry no prescribed MDR.
What Is MDR, and Why Does It Matter for Insurance Premiums?
MDR, or Merchant Discount Rate, is a payment-processing charge associated with accepting digital payments. Under the new UPI framework, it is a merchant-side charge within the payment ecosystem. So, when you pay an insurer through UPI, the insurer is treated as the merchant receiving that payment, and the MDR applies on the merchant side.
What Is Changing in UPI MDR From 15 October 2026?
The Department of Financial Services sets out the framework for UPI MDR:
A 0.4% MDR applies to specified person-to-merchant (P2M) payments above ₹2,000.
The MDR is capped at ₹300 for payments of ₹75,000 and above.
P2M payments up to ₹2,000 carry no MDR. They make up more than 95% of P2M volume.
Person-to-person transfers stay free.
Capital market payments carry 0.02%, capped at ₹300.
Railways, telecom, insurance and fuel, among others, pay a flat ₹5 on payments above ₹2,000.
How Much MDR Applies to an Insurance Premium Paid Through UPI?
Insurance premiums above ₹2,000 attract a flat MDR of ₹5 per transaction, whatever the premium amount. Premiums up to ₹2,000 attract none. The government says the flat-rate structure is intended to keep digital collection costs lower for insurers and support wider insurance coverage.
| Premium paid through UPI | Standard MDR (other merchants) | MDR on an insurance premium |
|---|---|---|
| ₹2,000 | Nil | Nil |
| ₹3,000 | ₹12 | ₹5 |
| ₹50,000 | ₹200 | ₹5 |
| ₹1,00,000 | ₹300 (capped) | ₹5 |
Note: The Standard MDR examples are based on the 0.4% rate and ₹300 cap stated in the Department of Financial Services
Who Pays the MDR on an Insurance Premium?
The merchant pays it. For a premium you pay directly to your insurer, that is the insurer. Merchants cannot pass MDR on to customers. UPI apps cannot levy a platform fee or any other charge on a UPI payment. UPI services continue at no cost to consumers. The MDR revenue is distributed within the UPI ecosystem to support infrastructure, cybersecurity, innovation and customer service.
UPI AutoPay vs One-Time Premium Payment
How the premium is collected decides which MDR rule applies.
| How the premium is paid | MDR from 15 October 2026 |
|---|---|
| One-time UPI payment up to ₹2,000 | Nil |
| One-time UPI payment above ₹2,000 | Flat ₹5 |
| UPI AutoPay or recurring mandate | No prescribed MDR |
The UPI Mandates and AutoPay do not carry the prescribed MDR. It names utility bills, OTT subscriptions and recurring investments alongside insurance premiums.
What the ₹5 MDR Does Not Mean for Policyholders
It is not a new charge on your UPI payment.
It does not change the premium printed in your policy or renewal notice.
It does not apply to premiums up to ₹2,000.
It does not apply to premiums collected through AutoPay.
It is not collected by the government.
It does not explain a change in your premium at renewal. MDR cannot be passed on to you, so any such change has another cause.
Frequently Asked Questions
Will my insurance premium cost more because of UPI MDR?
No. MDR is a merchant-side charge, and merchants cannot pass it on to customers. The premium you pay stays the same.
What is the MDR on an insurance premium paid through UPI?
A flat ₹5 per transaction for premiums above ₹2,000. Premiums up to ₹2,000 attract no MDR.
Who pays the ₹5 MDR when I pay my premium through UPI?
The merchant pays it. When you pay your insurer directly, the insurer is the merchant.
Does UPI AutoPay attract MDR on insurance premiums?
No. UPI Mandates and AutoPay carry no prescribed MDR.
Does MDR apply if I pay my premium with a credit card linked to UPI?
The credit-linked UPI payments follow credit product rules. The new MDR applies to direct account-to-merchant UPI payments.
Why is MDR being introduced on UPI?
The government says MDR revenue will support UPI infrastructure resiliency, innovation, cybersecurity and customer service.
