From October 15, 2026, UPI P2M payments above ₹2,000 attract MDR. Education is a designated category — verify the exact rate with your payment gateway, as it differs from the general merchant rate. UPI AutoPay recurring mandates are excluded from MDR entirely, regardless of amount or category. Schools and coaching institutes collecting monthly fees via AutoPay mandates will not be charged MDR on those collections.
UPI MDR on School & College Fees 2026:
What Changes on October 15
NPCI and RBI's new UPI Merchant Discount Rate (MDR) framework takes effect October 15, 2026. For schools, coaching institutes, and colleges collecting fees via UPI payment links, this is a material change. Here is what it means, what education institutions need to do before October 15, and why UPI AutoPay mandates remain the safest collection method.
What Changed with UPI MDR from October 15, 2026
Since 2020, UPI P2M (person-to-merchant) transactions carried zero MDR — the government had waived it to drive UPI adoption. That waiver ends on October 15, 2026 for transactions above ₹2,000.
Under the new framework:
- UPI P2M payments below ₹2,000 remain zero MDR
- UPI P2M payments above ₹2,000 attract MDR at rates set per merchant category
- UPI AutoPay recurring mandates are excluded entirely from the new MDR
- Certain categories (education, utilities, government) receive designated flat/capped treatment, not the general merchant rate
The exact MDR rate for education category institutions is set by NPCI and your acquiring bank. It is not necessarily the same as the general 0.4% P2M rate. Verify with your payment gateway (Razorpay, Cashfree, PhonePe Business, PayU, CCAvenue) what rate applies to your institution before October 15.
How Education Institutions Are Treated
Education is explicitly designated as a special merchant category under the new UPI MDR framework. This means:
A school or college collecting school fees is not treated the same as a general retailer. Education institutions receive a flat/capped MDR rate, not the standard variable rate.
Each payment gateway (Razorpay, Cashfree, PhonePe Business, etc.) implements the rate differently for the education category. Some may absorb a portion. The exact deduction per transaction depends on your gateway agreement.
Don't rely on a blanket "0.4% for all merchants above ₹2,000" calculation for your school fees. Contact your gateway before October 15 to confirm the exact rate applicable to your institution.
Why UPI AutoPay Mandates Remain MDR-Free
UPI AutoPay recurring mandates — where a parent approves a standing instruction and fees are debited automatically on the due date — are excluded from the new MDR framework. This exemption applies regardless of amount or merchant category.
Parent receives a WhatsApp/SMS payment link each time. Parent clicks and pays. Each payment above ₹2,000 is subject to MDR under the new framework. The merchant (school/coaching) bears the MDR cost.
Parent approves a standing mandate once. Fees auto-debit on the due date every month. The recurring mandate debit is excluded from the new MDR framework — no MDR cost to the school regardless of amount.
Impact on School and Coaching Fee Collection
The MDR impact depends on how your institution currently collects fees:
3 Actions Before October 15, 2026
Contact Razorpay, Cashfree, PhonePe Business, PayU, or CCAvenue — whichever gateway you use — and ask: "What MDR rate applies to my school/institution for one-time UPI payments above ₹2,000 from October 15?" Education category institutions typically get a different (lower) rate than general merchants. Get the exact number in writing.
For schools and coaching institutes that collect monthly fees, set up UPI AutoPay mandates for all active students or parents before October 15. AutoPay mandates are excluded from MDR. FastFee can set up UPI AutoPay mandates via PhonePe for your entire student base — contact us to start.
Bank transfers (NEFT/RTGS/IMPS) carry no MDR. For high-value annual fees (₹20,000–₹1,00,000+), offering parents the option to pay via bank transfer avoids MDR entirely. This does add reconciliation overhead — FastFee's auto-reconciliation handles unmatched NEFT payments automatically.
FAQ
Will schools and colleges have to pay UPI MDR from October 15, 2026?
Education institutions are a designated category under the new UPI MDR framework. They may receive flat/capped treatment rather than the general merchant rate. The exact rate depends on your gateway and must be confirmed directly. UPI AutoPay mandates are excluded from MDR regardless of category.
Are UPI AutoPay mandates for school fees subject to the new MDR?
No. UPI AutoPay recurring mandates are explicitly excluded from the new P2M MDR framework. Schools and coaching institutes collecting monthly fees via AutoPay mandates will not be charged MDR on those collections.
What is the MDR rate for education institutions under the new framework?
Education is a designated category — verify the exact rate directly with your payment gateway before October 15. Do not assume the general 0.4% P2M rate applies to your institution.
What should schools do before October 15?
(1) Confirm the exact MDR rate for education category with your gateway. (2) Migrate monthly fee collection to UPI AutoPay mandates (excluded from MDR). (3) For large one-time fees, offer NEFT bank transfer as an option (no MDR).
Does this apply to coaching institutes and colleges too?
Yes. Education category designation typically covers K-12 schools, colleges, universities, and coaching institutes. Verify with your specific gateway that your institution qualifies for the education category designation.
Avoid MDR entirely — switch to UPI AutoPay mandates
FastFee sets up UPI AutoPay mandates for your entire student base. Monthly fees auto-debit on the due date — no payment links, no MDR, no follow-up calls.
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