UPI MDR on loan repayments: What charge applies to EMIs and who bears it? Here's what borrowers need to know — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- NPCI's UPI MDR framework, effective October 15, 2026, will for the first time apply to debt collection transactions including loan repayments and EMI collections, with a flat ₹5 MDR on UPI payments above ₹2,000.
- Mukesh Pandey, Founder and MD of Rupyaapaisa.com, clarified that the ₹5 MDR is a merchant-side charge paid by lenders or collection agencies, not borrowers — and confirmed via example that a ₹5,000 EMI or ₹25,000 loan repayment through UPI would each trigger only the ₹5 fee.
- Siddharth Maurya of Vibhvangal Anukulara explained the parallel rule for credit card bill payments: the credit card issuer that receives the payment bears the MDR, not the cardholder — and crucially, UPI AutoPay-based EMI collections are exempt from the ₹5 MDR entirely, even when the auto-debited amount exceeds ₹2,000.
- The NPCI FAQs on MDR draw a sharp line between standard UPI payments (direct bank-to-merchant transfers) and credit-linked UPI transactions such as RuPay credit cards linked to UPI and pre-sanctioned bank credit lines, with the latter governed by the rules of the underlying credit product, per Raghunandan Saraf of Saraf Furniture.
- Government clarification, cited by Pandey, states explicitly that borrowers cannot be made to bear the MDR — though he warned that higher payment-processing costs may ripple through certain lender calculations, and any fee charged to customers must remain compliant with existing lending rules.
Why it matters: Lenders and EMI collection agencies face a new flat ₹5 processing cost per qualifying UPI debt-collection transaction starting October 2026, adding a fixed overhead that bites hardest on small-ticket NBFC and fintech EMIs. Borrowers are explicitly shielded — making UPI EMI repayment cheaper than card or net-banking alternatives — but Pandey and Maurya both warn that a lower EMI does not equal a cheaper loan, since longer tenures inflate total interest paid over the life of the loan.
Ask SkimNews
