The National Payments Corporation of India (NPCI) has recently introduced a new framework for the Unified Payments Interface (UPI) that has sparked significant discussion among digital payment users. The core of this update is the implementation of a 0 point 4 percent Merchant Discount Rate (MDR) on specific merchant transactions. This change, which is set to take effect from October 15, specifically targets merchant (P2M) transactions that exceed the value of 2000 rupees. As this news spread, it triggered a wave of curiosity and concern among Indian travelers and Non-Resident Indians (NRIs) who frequently use UPI services outside the borders of India, while the primary question arising is whether paying for a meal in Paris or shopping in Singapore via UPI will now become more expensive due to this new domestic regulation.
The Scope of UPI in 11 International Destinations
To understand the impact, one must first look at the extensive international footprint of UPI. Through its international arm, NPCI International Payments Limited (NIPL), the UPI network has successfully expanded into 11 major countries across various continents. In Europe and the Middle East, the service is active in France, the United Arab Emirates (UAE), Qatar, and Greece. In the South and East Asian regions, the network covers Singapore, Nepal, Bhutan, Sri Lanka, Maldives, Cambodia, and Mauritius. In these nations, Indian tourists and residents can scan local QR codes to make payments directly from their Indian bank accounts. The concern was that the 0 point 4 percent MDR would apply to these international merchant points, potentially increasing the cost of transactions abroad.
Clarification on International Transactions
However, NPCI and financial experts have provided a clear distinction between domestic and international transaction rules. The newly announced 0 point 4 percent MDR framework is strictly applicable to merchants registered within India. International UPI transactions operate under a different set of protocols managed by NIPL in collaboration with foreign partner banks. These cross-border payments are governed by international foreign exchange (Forex) regulations and the specific agreements signed between NIPL and the respective countries. Because of this, the domestic MDR change will have zero impact on transactions made at merchant outlets in France, Singapore, or any of the other 9 countries. Indian travelers can continue to use UPI abroad without worrying about this specific domestic fee being added to their international bills.
How International UPI Payments Function
When an Indian user scans a UPI QR code at an international location, such as the Eiffel Tower in France or Changi Airport in Singapore, the process remains transparent. The amount is deducted from the user's Indian bank account in Indian Rupees (INR). Before the final authorization of the payment, the UPI app displays the prevailing currency exchange rate and any standard forex charges that might apply, while these charges are determined by the bank and the international payment gateway, not by the new domestic MDR rule. This ensures that the digital payment experience for Indians traveling abroad remains as easy and cost-effective as it was prior to the October 15 update.
Detailed Breakdown of the New Domestic Rules
While international users are safe from the new fee, it's important to understand what exactly is changing within India. From October 15, merchant transactions (P2M) that are categorized as 'click-and-pay' and exceed 2000 rupees will attract a 0 point 4 percent MDR. This charge is capped at a maximum of 300 rupees per transaction. The Ministry of Finance has advised banks to ensure that merchants don't pass this cost on to the customers, meaning the service should remain free for the person making the payment. On top of that, for specific essential categories such as Railways, Telecom services, Insurance, and Fuel, NPCI has mandated a flat charge of 5 rupees for transactions above 2000 rupees instead of the percentage-based MDR. It's also crucial to note that Person-to-Person (P2P) transfers—money sent between friends or family members—remain entirely free of charge regardless of the amount.
Conclusion for Travelers and NRIs
In summary, the digital payment landscape for Indians traveling to the 11 supported countries remains stable. The 0 point 4 percent MDR is a domestic measure aimed at the Indian merchant ecosystem and doesn't extend to international shores. Whether you're an NRI living in one of these countries or a tourist exploring global destinations, your UPI transactions will continue to be processed based on existing forex agreements without the burden of the new domestic merchant fee. The focus of the government and NPCI remains on keeping UPI a free and accessible tool for the common citizen while creating a sustainable revenue model for the merchant infrastructure within India.