> ## Content Index > Fetch the complete content index at: https://research.finbox.in/llms.txt > Use this file to discover other available public pages before exploring further. # The Pattern #221: What a ₹5 UPI fee does to loan repayment - URL: https://research.finbox.in/newsletter/the-pattern/the-pattern-221-upi-fee-loan-repayment/ - Published: 2026-09-25T11:28:21.000Z - Updated: 2026-09-25T11:29:17.000Z - Description: Can the MDR on UPI hurt lender revenues? - Author: Mayank Jain - Tags: #ThePattern, newsletter, mayank jain, FinTech, RBI, EMIs, MDR, impact on repayment **The Pattern #221: What a ₹5 UPI fee does to loan repayment** Welcome to the 221st edition of The Pattern, a weekly newsletter on the latest across finance, technology, and the economy. For six years, a UPI payment had a beautifully simple arithmetic. You paid ₹4,000, the merchant received ₹4,000, and the cost of moving the money sat out of sight. From October 15, that changes for a narrow (but valuable slice) of transactions — including loan repayments. Here's what happened. The [Finance Ministry](https://www.businesstoday.in/india/story/6-crore-shopkeepers-traders-impacted-trade-body-urges-nirmala-sitharaman-to-roll-back-upi-mdr-557702-2026-09-25?ref=research.finbox.in) issued a gazette notification on September 14 under the amended Payment and Settlement Systems Act, and NPCI followed on September 15 with the rate card. The headline is a 0.4% merchant discount rate on person-to-merchant UPI payments above ₹2,000, capped at ₹300\. Some categories get concessional treatment: essential services like railways, telecom, fuel and insurance pay a flat ₹5 per transaction, and capital markets pay 0.02% Where does loan repayment sit? That hasn't been settled. The framework sets a concessional flat ₹5 for a debt-collection category, but whether a regular EMI qualifies is exactly the open question. In a detailed reading of the merchant-category rules, the regulatory firm [Vinod Kothari Consultants](https://vinodkothari.com/2026/09/zero-to-mdr-will-lenders-face-a-new-cost-on-loan-repayments/?ref=research.finbox.in) argues that the ₹5 code covers *overdue* debt collected by agencies, and that a regular on-time EMI would fall outside it — likely attracting the standard 0.4% rate instead. Lenders are waiting on formal FAQs to confirm it either way. It doesn't seem like much, but at the scale of millions of monthly EMIs, and set against one specific alternative, it's enough to move an entire industry. That alternative is UPI AutoPay. NPCI has [confirmed](https://www.businesstoday.in/personal-finance/investment/story/upi-mdr-from-october-15-what-happens-to-auto-debit-payments-for-mutual-funds-insurance-and-ott-subscriptions-555732-2026-09-15?ref=research.finbox.in) AutoPay mandates are exempt from the framework entirely. Manual repayment now costs the lender money. Automated repayment doesn't. Every lender running collections at scale can read that table, and it points one way: move borrowers off manual payment and onto mandates. That shift was already [underway](https://www.outlookmoney.com/news/upi-autopay-volumes-in-november-up-twice-from-last-year-sbi-continues-to-lead-2?ref=research.finbox.in). Across the top 10 banks, UPI AutoPay processed over 927 million transactions in November 2025 — more than double a year earlier, with SBI alone handling 290 million. The new fee removes the last reason to let manual repayment linger. For a lender, this is housekeeping. For a borrower, it moves control over the moment of repayment. Pay an EMI manually and you decide when the money leaves your account — you can wait for a salary to land, or hold off a day when the balance is thin. A mandate hands that timing to the lender. For a borrower with steady income, it makes no difference. For the volatile-income, small-ticket borrower — the fastest-growing segment in Indian lending — the ability to choose when to pay is a genuine tool, and it's the one being engineered away. There's a further wrinkle, and it's the one to watch. A standard AutoPay mandate can be paused or cancelled by the borrower anytime through their UPI app. But regulated lenders can use [non-revocable mandates](https://www.cashfree.com/blog/how-non-revocable-mandate-of-upi-autopay-empowers-your-microlending-business/?ref=research.finbox.in), which NPCI introduced in July 2022 specifically for loan repayment and EMI collection, and which borrowers cannot pause or cancel on their own. Borrowers already use the off-switch on standard mandates: UPI AutoPay revocations were running at roughly [20 million a month](https://www.business-standard.com/finance/news/upi-autopay-revocations-hit-20-mn-monthly-over-low-customer-balances-125090700500%5F1.html?ref=research.finbox.in), largely on low balances. People pause debits when money is tight. The incentive this fee creates pushes lenders toward the mandate type that takes that ability away. The stated purpose of the MDR is to fund UPI's infrastructure, cybersecurity and fraud prevention. Reasonable enough. But a payments-policy lever carries a credit-market consequence its framers may not have weighed: it nudges millions of loan repayments out of a channel the borrower controls and into one the lender does, with non-revocable mandates as the logical endpoint. Every lender will do the rational thing here, and the rational thing is to make repayment automatic and unstoppable. For a borrower with steady income, fine. For one living close to the edge, an unstoppable debit isn't convenience — it's the bank reaching the account first, every time, ahead of the rent and the groceries. **Thank you for reading. Please consider subscribing to our other publications** [**here**](https://research.finbox.in/newsletter/)**.** **Cheers,** **Mayank Jain** **Head – Marketing, FinBox**