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- The new UPI MDR framework will come into effect from 15 October 2026.
- Eligible insurance payments above Rs 2,000 will attract a flat Rs 5 MDR instead of the standard 0.4% rate.
- The Rs 5 MDR is a merchant-side charge, so policyholders will not have to pay an extra Rs 5 for making the payment.
- UPI AutoPay and recurring UPI mandates for insurance premiums are not subject to the prescribed MDR.
If you usually pay your health insurance premium through UPI, the new UPI rules may make you wonder whether your premium will cost more from October 2026.
The good news is that the new UPI rules' impact on insurance is mainly on the merchant side. So, if you are making a UPI insurance premium payment, the amount you pay for your premium does not increase by Rs 5 just because of the new rule.
This article will help you understand the new UPI rules 2026 in a proper way.
What Are the New UPI Rules 2026?
From 15 October 2026, a new MDR framework will apply to selected UPI Person-to-Merchant (P2M) payments.
For most qualifying merchant payments above Rs 2,000, the MDR is set at 0.4%. However, some categories, including insurance, have been given a separate flat-rate treatment.
Here are the key things to remember:
- Payments up to Rs 2,000: No MDR
- Payments above Rs 2,000: Rs 5 MDR
- The Rs 5 is paid within the merchant payment ecosystem.
- The customer does not pay an additional Rs 5.
- Recurring payments made through UPI AutoPay are not subject to the prescribed MDR.
This means the new rule does not mean that every UPI payment above Rs 2,000 will cost the customer more.
Why Is the Rs 5 Charge Being Applied under the New UPI Rule?
The Rs 5 is an MDR, or Merchant Discount Rate. It is the charge associated with accepting certain digital merchant payments.
Under the new framework, selected sectors have been given a flat Rs 5 rate instead of the standard 0.4% MDR for payments above Rs 2,000. Insurance is one of these categories.
The important point for policyholders is that this does not become an extra Rs 5 on their premium.
Raj's Example: Paying a Health Insurance Premium Through UPI
Let us take a simple example.
Raj buys a health insurance policy from Square Insurance and his annual premium is Rs 30,000. On 20 October 2026, Raj makes a one-time UPI payment of Rs 30,000 towards his health insurance premium.
Since:
- The payment is made after 15 October 2026
- It is a one-time UPI merchant payment
- The amount is above Rs 2,000
- The payment falls under the eligible insurance category
The applicable MDR would be Rs 5 under the new framework.
Who pays the Rs 5?
The merchant bears the MDR, not Raj.
Raj does not need to add Rs 5 to his premium simply because he has used UPI.
Note: This is an illustrative example of how the new rule would work. The actual payment treatment depends on how the transaction is classified within the UPI payment ecosystem.
- Railways
- Telecommunications
- Insurance
- Fuel
- Agricultural inputs
- Certain utility payments
What About UPI AutoPay for Health Insurance?
If you have set up a recurring health insurance premium through a UPI AutoPay mandate, the prescribed MDR does not apply to that recurring mandate.
This makes it important to distinguish between a one-time UPI payment and a recurring UPI AutoPay payment.
Note: Just like health insurance, this new rule also applies to car insurance, bike insurance, and other insurance payments.
Conclusion
The new UPI rules 2026 do not mean that your health insurance premium will become Rs 5 more expensive when you pay through UPI.
If you use UPI AutoPay for recurring health insurance premiums, the prescribed MDR does not apply to those mandates.
So, when making a UPI insurance premium payment, you do not need to add Rs 5 to your premium simply because of the new MDR framework.
FAQs
No, the Rs 5 MDR for eligible insurance payments is a merchant-side charge and is not an additional UPI fee payable by the policyholder.
Eligible insurance payments above Rs 2,000 will attract a flat Rs 5 MDR from 15 October 2026.
The merchant pays the MDR within the merchant payment ecosystem. It is not supposed to be passed on to the customer as an additional UPI charge.
No, the new framework does not make the Rs 5 MDR an additional charge for the policyholder.
No, recurring UPI AutoPay mandates are not subject to the prescribed MDR under the new framework.
Eligible insurance payments up to Rs 2,000 remain at zero MDR under the new framework.
The new MDR framework is scheduled to come into effect from 15 October 2026.
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