Insurance premiums paid through UPI will not attract an additional MDR charge to policyholders from October 15, 2026. A one-time insurance premium payment above Rs. 2,000 will attract a flat Rs. 5 MDR within the merchant payment ecosystem, while customers will not be charged this MDR. Insurance premiums collected through UPI AutoPay or recurring mandates do not attract the prescribed MDR. P2P UPI transactions and merchant payments up to Rs. 2,000 will also remain free of MDR.
Table of Contents
- What Is Changing in UPI From October 15, 2026
- Will Your Insurance Premium Payment Through UPI Cost More
- How NPCI Treats Different UPI Payments From October 15
- UPI AutoPay vs One-Time Payment: Why the Method Matters
- What the Rs. 5 MDR Does Not Mean for Policyholders
- Comparing Insurance With Other Regular UPI Payments
- What Policyholders Should Do Before October 15
If you have ever set up an insurance premium on UPI AutoPay and then forgotten about it until the debit message pops up, you are exactly the reader this piece is for. Starting October 15, 2026, a new Merchant Discount Rate (MDR) framework will apply to specified UPI Person-to-Merchant (P2M) transactions above Rs. 2,000. The framework does not introduce a charge for consumers using UPI. The framework does not apply the same MDR to every UPI payment above Rs. 2,000. Different merchant categories have different treatment, while P2P transactions remain outside the MDR framework. The short answer is more reassuring than the panic suggests, but the details matter and by the end of this article you will know exactly what changes for your insurance payments and what does not.
What Is Changing in UPI From October 15, 2026
NPCI issued a detailed FAQ on September 15, 2026, laying out how the new MDR framework will actually work. For specified Person-to-Merchant, or P2M, UPI transactions above Rs. 2,000, merchants will now pay an MDR of 0.4 per cent, capped at Rs. 300 for transactions of Rs. 75,000 and above. This is not a fee charged to the person paying. MDR is a charge within the merchant payment ecosystem and is distributed among participating banks, payment service providers and UPI application providers. The government says the framework is intended to support the continued operation, expansion and sustainability of the UPI ecosystem.
Person-to-person transfers stay completely free and so do P2M payments of Rs. 2,000 or below, which NPCI says cover more than 95 per cent of all UPI merchant transactions. Small merchants receiving up to Rs. 1 lakh per month through UPI QR codes under the P2PM category will also continue to enjoy zero MDR. So the framework is narrower than the initial headlines implied and insurance premiums fall into one of its more consumer-friendly carve-outs.
Will Your Insurance Premium Payment Through UPI Cost More
Here is the part that matters most to policyholders. NPCI has placed insurance in a concessional category alongside railways, telecom and fuel. Instead of the standard 0.4 per cent, insurance premium payments above Rs. 2,000 attract a flat MDR of Rs. 5 per transaction, regardless of whether you are paying Rs. 3,000 or Rs. 3 lakh. That flat structure alone tells you the charge is not designed to scale with your premium size.
More importantly, this Rs. 5 MDR applies only to a one-time, fresh UPI payment made directly to the merchant. If your premium is collected through a UPI AutoPay mandate, an existing standing instruction that debits automatically on the due date, NPCI's FAQ is explicit that recurring mandates do not attract the prescribed MDR at all. So a policyholder who has authorised annual premium collection through AutoPay will not see that mandate turn into a separate customer charge just because the calendar flips to October 15.
We have already started fielding calls from SMC customers who saw the "UPI charges" headlines and assumed their auto-debited health or term premium was about to jump. In almost every case, once we check how the premium is actually being collected, whether it is a standing AutoPay mandate or a manual payment made fresh each time, the worry turns out to be unfounded. It is worth checking your own payment mode before assuming anything changes for you.
How NPCI Treats Different UPI Payments From October 15
The confusion largely comes from treating every UPI transaction above Rs. 2,000 as identical. They are not. NPCI has built separate slabs for separate categories and insurance sits in the cheapest one available to individual consumers.
Transaction Type |
Applicable MDR |
Customer impact |
Specified P2M transactions above Rs. 2,000 | 0.4%, capped at Rs. 300 for Rs. 75,000 and above | Customer does not pay MDR |
Insurance, railways, telecom, fuel and specified other sectors above Rs. 2,000 | Flat Rs. 5 per transaction | Customer does not pay MDR |
Capital-market transactions above Rs. 2,000 | 0.02%, capped at Rs. 300 | Customer does not pay MDR |
UPI AutoPay and recurring mandates | No prescribed MDR | No MDR payable by customer |
P2M payments up to Rs. 2,000 | Zero MDR | No MDR payable by customer |
P2P transactions | Zero MDR | No MDR payable by customer |
Note: Figures are based on NPCI's FAQ dated September 15, 2026 and the framework takes effect October 15, 2026. MDR is a merchant-side cost within the payment ecosystem and is not deducted from the customer's bank account as a separate UPI transaction fee.
Two things stand out from that table. One, the MDR is always paid by the merchant's payment processing chain, not lifted directly from your account. Two, insurance has a separate concessional MDR structure rather than the standard 0.4% rate applicable to specified P2M transactions.
UPI AutoPay vs One-Time Payment: Why the Method Matters
This is the single biggest factor deciding whether October 15 touches your premium at all. Think of it less as "does my payment amount cross Rs. 2,000" and more as "how is that payment being collected."
If you pay your annual health insurance premium by opening your UPI app each year, scanning the insurer's QR code or entering their VPA and confirming manually, that is a one-time P2M transaction. Provided the amount is above Rs. 2,000, the Rs. 5 flat MDR applies within the merchant ecosystem and you will not notice it since it is not charged to you.
If instead you set up UPI AutoPay once, authorising your insurer to debit the premium automatically every year or every month, that recurring mandate sits entirely outside the new MDR structure. NPCI's FAQ groups insurance premiums with mutual fund SIPs, electricity bills and OTT subscriptions here, all treated the same way: standing instructions are exempt.
So the practical guidance is simple. Check your insurance app or your bank's UPI mandate list. If you see an active AutoPay authorisation for your premium, October 15 changes nothing for that payment. If you have been paying manually each renewal cycle, nothing changes for you as a customer either, since the Rs. 5 MDR is absorbed by the insurer's payment gateway relationship, not billed to your account.
If you are unsure which category your own premium payments fall under, our advisors can walk you through your policy's payment history and help you set up AutoPay correctly so renewals never lapse. Reach out through SMC Insurance and we will sort it out in a few minutes.
What the Rs. 5 MDR Does Not Mean for Policyholders
- It does not mean that your insurer can automatically add Rs. 5 to your insurance premium because of UPI MDR.
- It does not create a separate UPI charge for the customer.
- It does not apply to insurance premiums collected through UPI AutoPay or recurring mandates under the prescribed MDR framework.
- It does not change the insurance premium stated in your policy or renewal notice.
- Any change in your actual premium should be checked against the insurer's official renewal communication and should not automatically be attributed to UPI MDR.
Comparing Insurance With Other Regular UPI Payments
Readers often ask how their insurance premium stacks up against other recurring bills they pay through UPI. The comparison is reassuring because NPCI has applied the same logic across the board.
A mutual fund SIP of Rs. 10,000 collected through AutoPay carries no prescribed MDR, exactly like an insurance premium collected the same way. A one-time mutual fund investment above Rs. 2,000, however, falls into the capital markets slab at 0.02 per cent, capped at Rs. 300, which is a different rate from insurance's flat Rs. 5. Utility bills and OTT subscriptions follow the insurance pattern closely: a recurring mandate is exempt and a one-off payment above Rs. 2,000 attracts whatever category rate applies, again absorbed by the merchant side.
The pattern to remember is that NPCI is drawing a line between how a payment is made rather than only what it is for. [LINK: your published article on setting up UPI AutoPay for premium payments] walks through the setup process in more detail if you want to move your own premiums onto a mandate before your next renewal.
What Policyholders Should Do Before October 15
There is no urgent action forced by this change, since consumers were never going to be charged directly. But a few housekeeping steps are worth doing anyway, especially with renewal season around the corner for many policyholders.
- Check your current mandates.
Open your UPI app's AutoPay or mandate section and confirm which of your insurance premiums, if any, are already on a standing instruction. This takes under two minutes and clears up most of the confusion in one look. - Keep your linked bank account funded.
AutoPay mandates fail silently if there is insufficient balance on the debit date and a failed premium debit can put you dangerously close to a policy lapse, independent of anything to do with MDR. - Watch for renewal notices.
Insurers sometimes update their UPI VPA or payment gateway around framework changes like this one. A quick check against your insurer's official app or website before paying avoids sending money to an outdated or spoofed handle. - Ask before assuming.
If your premium notice mentions any change in the payable amount around October, call your insurer or your advisor directly instead of guessing. Given how widely this story has been reported, a small increase unrelated to MDR could easily get blamed on it by mistake.
Summing Up
UPI will not become a paid service for consumers on October 15, 2026 and your insurance premium is one of the payment types NPCI has gone out of its way to protect. A one-time premium payment above Rs. 2,000 draws a flat Rs. 5 MDR that sits with the merchant's payment gateway, never touching your bank balance. A premium collected through UPI AutoPay carries no prescribed MDR at all. The real task for policyholders is not bracing for higher costs, it is simply knowing which payment mode you are on and making sure that mode stays funded and active so your cover never lapses over a technicality. If you have not reviewed your premium payment setup in a while, this is as good a prompt as any to do it.
Disclaimer: The information provided on this platform is intended for general awareness and educational purposes. While every effort is made to ensure accuracy, some details may change with policy updates, regulatory revisions, or insurer-specific modifications. Readers should verify current terms and conditions directly with relevant insurers or through professional consultation before making any decision.
All views and analyses presented are based on publicly available data, internal research and other sources considered reliable at the time of writing. These do not constitute professional advice, recommendations, or guarantees of any product’s performance. Readers are encouraged to assess the information independently and seek qualified guidance suited to their individual requirements. Customers are advised to review official sales brochures, policy documents and disclosures before proceeding with any purchase or commitment.
FAQs
The new UPI MDR framework does not add an MDR charge to the policyholder. For a one-time insurance premium payment above Rs. 2,000, the applicable MDR is a flat Rs. 5 within the merchant payment ecosystem. Premiums collected through UPI AutoPay do not attract the prescribed MDR. Any change in the premium itself would be separate from the UPI MDR framework.
Insurance premium payments above Rs. 2,000, when made as a one-time UPI transaction, attract a flat MDR of Rs. 5, regardless of the premium amount. This is separate from the standard 0.4 per cent MDR that applies to general retail merchant payments.
No, NPCI's FAQ explicitly excludes recurring UPI mandates, including insurance premiums, mutual fund SIPs, utility bills and OTT subscriptions, from the prescribed MDR structure. A standing instruction is treated differently from a fresh transaction.
The Rs. 5 MDR is a merchant-side charge within the payment ecosystem. The government has clarified that it is not a charge on customers and that banks must ensure merchants do not pass the MDR on to customers.
Open your UPI app, usually under a section called AutoPay, Mandates or Autopay & Subscriptions and look for your insurer listed there with the premium amount and frequency. If it is not listed, you are likely paying manually at each renewal.
No, person-to-person transfers remain completely free regardless of amount and any merchant payment of Rs. 2,000 or below stays outside the MDR framework entirely, covering over 95 per cent of all UPI merchant transactions in India.
NPCI has said the revenue generated will support UPI infrastructure, cybersecurity, fraud prevention and customer service as transaction volumes keep growing. It is designed as a commercial mechanism within the merchant ecosystem rather than a consumer charge.
