The new UPI rules will change how certain high-value merchant transactions are handled from 15 October, bringing insurance and capital-market payments under the merchant discount rate (MDR) framework. Will that mean your insurance, SIP, and OTT subscriptions will increase?
How will your insurance and SIP payments be charged?
For consumers like you and me, the impact will depend on what we pay for and how we make these payments. For example:
- Insurance payments above ₹2,000 will incur a flat ₹5 MDR
- Payments related to mutual funds, securities, and stockbroking will incur an MDR of 0.02%, capped at ₹300.
But does not mean that consumers will have to pay these charges directly. MDR is generally a fee paid by the merchant to banks and payment service providers. Whether your bill will increase depends on whether a business passes the costs on to customers.
What does AutoPay mean?
As per the new rules, OTT subscriptions – Netflix, Amazon, Jiohotstar – and utility bills paid automatically through UPI AutoPay will be treated differently from one-time UPI payments. Such payments will be considered as recurring payments, and there will be no charges on these payments
That means no extra charges will be levied for UPI AutoPay for services such as OTT subscriptions, mobile bills, electricity bills, insurance and mutual funds
Govt sets 0.4% fee on UPI payments above ₹2,000
Ending nearly six years of a fully free Unified Payments Interface (UPI) network for merchants, the government on Tuesday introduced a 0.4 per cent transaction fee on payment above ₹2,000, capped at ₹300 for payments of ₹75,000 and above, from October 15, while explicitly ring-fencing everyday person-to-person transfers from any charge.
The carefully calibrated move signals the end of an era for the world’s largest real-time payments system even as the government tries to avoid alarming the hundreds of millions of users who use it daily.
Person-to-person (P2P) transfers – which make up 37 per cent of UPI’s transaction volume and 70 per cent of its transaction value – will continue to attract zero charges, irrespective of size. Small-value transactions up to ₹2,000, which the government said account for more than 95 per cent of total P2M volume, remain untouched.
“Charges will apply only to person-to-merchant (P2M) transactions exceeding ₹2,000,” the finance ministry said in a statement. “A nominal merchant discount rate (MDR) of 0.4 per cent will be levied on P2M transactions above ₹2,000. This commission will be shared amongst the payment ecosystem partners including banks and app providers.”
Essential and thin-margin sectors – railways, telecom, insurance, fuel and agricultural inputs – will pay a flat MDR of ₹5 per transaction above ₹2,000, intended to keep costs predictable for critical services; these categories account for nearly 17 per cent of P2M transaction volume but roughly 46 per cent of P2M transaction value.
In August, UPI processed a total of 24.5 billion transactions worth 29,823 billion rupees for more than 550 million users, official data show.
UPI has a share of 84% in India’s digital payments by volume and a 49% share of global real-time payment volumes, the government said on Tuesday.
Walmart’s PhonePe and Alphabet’s GooglePay had about 80% market share by value of UPI transactions in August.