UPI MDR May Go Global From October 15 as 11-Country Network Comes Under New Framework

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For Indian users, the short-term impact is limited because MDR remains a merchant-side charge. The official Ministry of Finance release dated 15 September 2026 says customers will not pay MDR, person-to-person transfers will stay free and merchant payments up to ₹2,000 will remain outside the charge. The pressure falls on eligible merchants and payment participants handling higher-value transactions. Abroad, foreign exchange rates or other permitted payment costs can still apply separately from MDR.

How Will The Overseas MDR Change Affect Indian UPI Users?

A traveller using UPI at an eligible overseas merchant should not read the 0.4% rate as a new customer fee. The official framework says banks must ensure merchants do not pass MDR to customers, while UPI application providers cannot impose a platform fee or hidden charge under this framework. That distinction becomes important when the merchant-fee structure moves outside India.

The 11-country figure also needs to be read correctly. A government backgrounder dated 24 August 2026 said UPI was live in 11 foreign countries for “UPI Acceptance and/or Cross-Border Remittances”. Bhutan, Nepal, Singapore, the UAE, France, Sri Lanka, Mauritius and Qatar were already operational. Cambodia added UPI acceptance in June 2026, while Greece and the Maldives were added through cross-border remittance links.

The payment rules starting on 15 October are structured around the transaction category rather than the location alone. The official MDR FAQ dated 15 September 2026 sets out the categories.

The government said about 96% of merchant transactions would remain unaffected because they are below the ₹2,000 threshold or covered by small-merchant protection. Small merchants receiving up to ₹1 lakh a month through UPI QR codes under the P2PM category continue to receive zero-MDR treatment.

A LoansJagat reading of the change places the first direct impact on merchant settlement costs rather than on the customer’s payment screen. Its earlier coverage also separated the merchant fee from a consumer transaction charge. For larger merchants, payment costs and offer structures may require closer review after the framework begins.

What Do Payment Experts And Traders Say About The New MDR?

Vishwas Patel, Chairman of the Payments Council of India, said on 16 September 2026 that UPI needs a sustainable economic model to support its scale. He said banks, fintech firms, payment aggregators and other participants need continued spending on infrastructure, cybersecurity, fraud prevention, technology and customer service. He also said financial inclusion should remain protected.

Trader groups have focused more sharply on merchant costs. Praveen Khandelwal of the Confederation of All India Traders sought a short deferment and wider consultation before implementation, according to comments reported on 24 September. Finance Ministry sources also said the government would engage with the Indian Banks’ Association to ensure MDR is not passed on to customers.

Part of the response is already written into the framework. Low-value merchant payments, P2P transfers and eligible small merchants remain protected, while banks have been advised to prevent customer surcharges. For overseas use, separating merchant MDR from any foreign exchange cost shown during payment will be equally important.

What Happened Before The 11-Country MDR Update?

The policy changed in stages. On 8 August 2026, the government said an amendment to the Payment and Settlement Systems Act, 2007, would create an enabling provision for a threshold-based MDR on a limited set of merchant transactions. It also stated that consumers and P2P transfers would continue without transaction charges.

On 15 September 2026, the government published the detailed framework after deliberations by the UPI Steering Committee. It fixed 0.4% MDR for specified P2M payments above ₹2,000 and a ₹300 cap for qualifying transactions of ₹75,000 and above. Essential and thin-margin sectors such as railways, telecom, insurance, fuel and agricultural inputs were given a flat ₹5 MDR on applicable payments above ₹2,000.

The overseas base had already been established. An official update dated 24 August 2026 placed UPI’s international footprint at 11 countries. On 24 September, Finance Ministry sources said the revised MDR framework would also apply in those markets and that the 15 October start date would remain.

Conclusion

The October change does not turn every overseas UPI payment into a charged transaction for Indian customers. MDR remains part of the merchant payment system, while P2P transfers and protected merchant categories stay outside it.

The larger development is that India’s merchant-payment pricing model is now being linked to UPI’s overseas network. Since the 11-country footprint covers both merchant acceptance and remittance arrangements, each transaction still has to be read by category. For users, the central point remains straightforward: MDR is not a customer UPI fee.

FAQs

1. Will Customers Pay 0.4% MDR On UPI Payments Abroad?

No. The government says MDR is a merchant-side charge and customers should not be charged it.

2. Which 11 Countries Currently Have UPI Links?

The government lists Bhutan, Nepal, Singapore, UAE, France, Sri Lanka, Mauritius, Qatar, Cambodia, Greece and Maldives.

3. If MDR Applies Above ₹2,000, Can A Payment Simply Be Split?

The official rules define charges by transaction and merchant classification. Payment splitting is not listed as an MDR exemption.

4. Can Indians Use UPI Internationally?

Yes, at supported overseas locations and remittance corridors. Availability differs according to the UPI arrangement operating in each country.

5. When Does The New UPI MDR Framework Start?

The revised framework is scheduled to take effect on 15 October 2026.