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UPI AutoPay SIPs and OTT subscriptions will not carry the prescribed MDR.
One-time mutual fund and capital-market UPI payments will face 0.02% MDR, capped at Rs. 300.
Specified P2M payments above Rs. 2,000 can attract 0.4% MDR, with a Rs. 300 cap.
A new UPI Merchant Discount Rate (MDR) framework has raised a simple but important question: will routine payments such as mutual fund SIPs, rent and OTT subscriptions cost more from October 15? The answer depends less on the payment amount and more on the type of UPI transaction.
The new framework will apply a 0.4% MDR to specified person-to-merchant (P2M) UPI payments above Rs. 2,000. For transactions of Rs. 75,000 or more, the charge will have a Rs. 300 cap. Person-to-person payments will remain free at every value. Merchant payments up to Rs. 2,000 will also stay free. The government says about 96% of P2M transactions will remain outside the MDR framework.
The biggest relief comes for recurring payments. NPCI has clarified that UPI Mandates and AutoPay recurring transactions will not carry the prescribed MDR. The rule covers recurring utility bills, OTT subscriptions and recurring investments such as mutual fund SIPs.
This distinction matters for a monthly SIP. A Rs. 10,000 SIP through a UPI AutoPay mandate will not attract the new 0.4% MDR merely on account of its value. The scheduled debit can continue under the existing mandate structure.
The same rule applies to an OTT subscription. A Netflix, Amazon Prime or JioHotstar payment through an eligible UPI AutoPay mandate does not attract the prescribed MDR merely for crossing Rs. 2,000. The new framework therefore does not turn a Rs. 2,500 recurring subscription into a Rs. 2,510 payment.
Mutual funds need a closer look. The payment route decides which MDR rule applies. A recurring mutual fund SIP through UPI AutoPay remains outside the prescribed MDR. A one-time UPI payment for mutual funds, securities, stockbrokers or dealers, however, falls under a separate capital-market category.
That category carries an MDR of 0.02%, capped at Rs. 300 per transaction. The rate is far below the standard 0.4% rate for specified P2M payments above Rs. 2,000. The government says the lower rate aims to support retail participation in formal financial markets.
The difference can matter for brokers and fund platforms. Reuters reported concerns from the brokerage sector about the cost of frequent UPI transactions. Zerodha chief executive Nithin Kamath also raised concerns about the long-term ability of brokers to absorb the new cost.
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Rent does not have the same clear AutoPay treatment as an ordinary subscription unless the payment uses a UPI Mandate or AutoPay structure. A simple transfer from one person to another remains a P2P transaction, and the new framework does not apply to such transfers. The government has confirmed that P2P UPI payments will remain free, regardless of value.
A rent payment to a merchant or property service provider can fall under the P2M framework if the transaction meets the relevant conditions. The official framework does not list rent as a separate special category. As a result, the exact treatment depends on the payment structure and the status of the recipient. That makes the payment route more important than the word ‘rent’ itself.
The new MDR remains a merchant-side charge within the UPI payment ecosystem. The government has stated that customers will not pay MDR as a separate UPI transaction fee. Banks have also received advice to stop merchants from passing the MDR to customers, while UPI app providers cannot add platform fees or hidden charges under this framework.
This means a Rs. 20,000 eligible merchant payment does not automatically become a Rs. 20,080 debit from the customer’s bank account.
The commercial impact can still reach businesses. Reuters reported opposition from retailer groups, which warned that the new cost could put pressure on already narrow margins. Some industry groups have also raised concerns about the timing of the change ahead of the festive season.
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The new framework starts on October 15, 2026. Standard P2M transactions above Rs. 2,000 can attract 0.4% MDR, with a Rs. 300 cap for transactions of Rs. 75,000 and above. Railways, telecom, insurance, fuel and agricultural inputs above Rs. 2,000 get a flat Rs. 5 MDR. Capital-market payments get the separate 0.02% rate, capped at Rs. 300.
The key divide is therefore clear. UPI AutoPay SIPs and OTT subscriptions remain outside the prescribed MDR. P2P rent transfers remain free. One-time capital-market payments face a separate 0.02% MDR, while specified large merchant payments face 0.4%.
For households, the immediate change looks limited. The bigger shift sits inside the payment ecosystem, where banks, payment service providers, apps, brokers and merchants must adjust to a new cost structure after more than six years of zero-cost UPI merchant payments.
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 Rs. 300 per transaction.
5. When will the new UPI MDR framework start?
The new framework takes effect on October 15, 2026.
