Refueling with Petrol, Diesel, or CNG via UPI to Cost More: Here’s the Applicable Charge

Payments made via UPI will now incur a charge. A decision has been made to levy a UPI Merchant Discount Rate (MDR) of 0.4% on 'Person-to-Merchant' (P2M) transactions. This fee will apply only to UPI payments exceeding ₹2,000.

UPI transactions will no longer be free. Under the new framework by the National Payments Corporation of India (NPCI), a Merchant Discount Rate (MDR) of 0.4% will be charged on merchant payments (P2M) exceeding ₹2,000. This new rule will come into effect on October 15, 2026. Notably, this charge is capped at ₹300 per transaction; this means that even for payments of ₹75,000 or more, the maximum UPI MDR charged will be ₹300.

Exemptions for Certain Sectors

The regulator has granted special exemptions to three key sectors compared to standard transactions: railways, telecommunications, and the fuel and capital markets. People might now wonder how much more expensive it will be to refuel with petrol, diesel, or CNG using UPI, given that daily commuting is a necessity and requires regular refueling of vehicles.

How Much Will Refueling via UPI Cost?

The NPCI has clearly stated that a flat MDR of ₹5 will be charged on fuel payments exceeding ₹2,000 made via UPI at petrol pumps. The NPCI stated, "A flat concessionary rate of ₹5 will apply to fuel payments made via UPI exceeding ₹2,000 at petrol pumps. However, the relief is that this fee will not be collected from general consumers; the government and banks have clarified that this charge must be borne solely by the merchants and cannot be passed on to customers."

What is the benefit of the ₹5 flat fee?

The NPCI has stated that this flat fee of ₹5 will protect petrol pump operators from the high processing fees associated with tank refills. Since transaction values ​​at petrol pumps often range from ₹2,000 to ₹5,000 or more, a fee charged at a rate of 0.4% could impose a heavy financial burden on pump operators. This flat fee rule was introduced to shield petrol pump owners from such losses.

Consider this example: If the standard 0.4% charge rule applied to fuel payments, a customer purchasing petrol worth ₹5,000 would result in a deduction of ₹20 from the petrol pump owner's account, thereby impacting their profit. Now, under the flat ₹5 rule, whether a customer fills petrol worth ₹5,000 or ₹10,000, only ₹5 will be deducted from the petrol pump owner's account.

What if the payment is less than ₹2,000?

The MDR (Merchant Discount Rate) will remain zero for fuel payments below ₹2,000. This means no transaction charge will apply to fuel purchases below this amount. The NPCI also clarified that fuel station operators will not have to pay any MDR on these transactions.