Insurance policyholders using UPI AutoPay for recurring premium payments will not have to pay an additional charge when the new UPI Merchant Discount Rate (MDR) framework takes effect on October 15, 2026. The National Payments Corporation of India (NPCI) has clarified that recurring UPI mandates, including automated insurance premium payments, will remain outside the prescribed MDR framework.
The clarification is important for customers who have linked their insurance premiums to UPI AutoPay. Under the existing facility, policyholders can authorise recurring payments and allow their insurer to collect premiums automatically on the scheduled date. NPCI already lists insurance among the recurring payments supported through UPI AutoPay.
Insurance premiums through UPI AutoPay remain unaffected
From October 15, specified person-to-merchant UPI transactions above Rs 2,000 will attract an MDR of up to 0.4 per cent. However, NPCI has specifically excluded recurring UPI mandates from the prescribed MDR.
This means an insurance policyholder with an annual premium of Rs 50,000, for example, will not face a separate MDR simply because the insurer collects the premium through an existing UPI AutoPay mandate. The recurring nature of the payment matters more than the premium amount.
What happens to one-time insurance payments?
The treatment differs when a customer makes a fresh, one-time insurance payment through UPI instead of using an automated mandate.
NPCI has placed insurance among specified categories that will attract a concessional flat MDR of Rs 5 for transactions above Rs 2,000. The MDR remains a charge within the merchant payment ecosystem rather than a standard UPI transaction fee charged directly to customers.
Therefore, policyholders should distinguish between a recurring insurance premium payment through UPI AutoPay and a one-time UPI payment made to an insurer.
Will insurers pass the MDR to customers?
The new MDR framework does not turn UPI into a paid service for consumers. NPCI has stated that customers will continue to use UPI without transaction charges. The new framework instead creates a merchant-side payment cost for specified transactions.
For insurance customers, the practical takeaway is straightforward: an existing UPI AutoPay insurance premium mandate does not require an increase in the premium amount because of the October 15 MDR changes.
However, customers making one-time insurance payments should check how their transaction gets processed and whether it falls within the applicable merchant category.
The new rules therefore do not mean that every insurance premium above Rs 2,000 will become more expensive. For recurring insurance payments through UPI AutoPay, NPCI’s September 15 clarification keeps the prescribed MDR outside the transaction.
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