India’s digital payment ecosystem may soon see a major policy change. The government plans to allow Merchant Discount Rate charges on UPI payments. However, this charge will apply only to merchant transactions, while person-to-person transfers will remain free for users. At the same time, India’s UPI network continues expanding across international markets. Several countries now accept UPI payments, allowing Indian travellers to make easy digital payments abroad.
Government plans MDR framework for UPI transactions
The government is preparing amendments to the Payment and Settlement Systems Act. After this change, the Reserve Bank of India will receive complete authority to decide MDR rules for UPI transactions. MDR refers to the fee banks collect from merchants for providing digital payment services. Therefore, the proposed move aims to strengthen payment networks and banking systems.
According to the proposal, UPI payments above ₹2,000 for person-to-merchant transactions may attract charges. The expected fee could range between 0.25% and 0.4%, equal to 15 to 30 basis points. However, the government must complete parliamentary approval before introducing this system. Additionally, authorities will hold discussions with companies and industry representatives.
Importantly, person-to-person transfers will not face these charges. Regular users sending money directly to another account will continue receiving free services.
UPI expands presence across nine countries
Indian payment technology has gained international recognition. UPI services already operate across eight major countries, including Singapore, UAE, Nepal, Sri Lanka, Mauritius, Bhutan, France, and Qatar. Recently, Cambodia became the ninth country to join this network.
As a result, Indian citizens travelling abroad can use familiar UPI apps for payments. They can scan QR codes at shops and make digital transactions using existing applications.
Foreign UPI payments remain free but currency conversion costs apply
When users make payments abroad through UPI apps or NPCI-supported platforms, no app-level fee applies. The service remains available without platform charges. However, currency conversion can increase the final payment cost.
Banks may charge around 1.5% to 3.5% as forex markup during currency conversion. Furthermore, some banks may apply a fixed processing fee between ₹15 and ₹50 per transaction.
Before making international payments, users must activate the UPI International feature. They can enable it through apps like PhonePe or Google Pay. Additionally, international transactions usually have a daily limit between ₹1 lakh and ₹2 lakh. However, the exact limit depends on bank rules and account type.
