In a major relief for crores of digital payment users across the nation, the National Payments Corporation of India (NPCI) has clarified that no Merchant Discount Rate (MDR) will be levied on UPI transactions made for purchasing insurance policies or paying premiums. This crucial decision ensures that insurance buyers will not face any additional financial burden when securing their policies through digital channels.
New UPI Regulations From October 15
The clarification comes ahead of the implementation of new UPI guidelines scheduled for October 15, which propose the application of MDR on certain UPI transactions exceeding Rs 2,000. This upcoming rule had triggered widespread confusion among both consumers and merchants regarding which services would attract additional transaction fees, especially for recurring payments, OTT subscriptions, and other high-value bills.
Special Category Status for Insurance Sector
To protect consumers from rising costs, NPCI has placed the insurance sector under a distinct category, completely exempting it from any MDR levies. This step ensures that policyholders can continue to pay large sums without paying extra processing charges. For instance, if a policyholder pays an annual insurance premium of Rs 50,000 via UPI, they will save a significant amount that would have otherwise been charged as transaction fees under standard merchant guidelines.
Impact on OTT Auto-Pay and Other Services
While insurance premium payments remain completely exempt, discussions continue regarding other transactions like school fees, petrol pump payments, and automated recurring payments for OTT platforms like Netflix. It is important to note that MDR is typically a merchant-side fee rather than a direct consumer tax, but service providers often pass these costs down to the end-users. The total exemption of the insurance sector aligns with the national goal of achieving universal insurance coverage across India by 2033, making essential financial security products highly accessible through digital modes.
