A new Merchant Discount Rate (MDR) framework for UPI payments will come into effect from October 15, 2026, but NRIs using UPI in India will not face a blanket charge on their transactions.
According to the Ministry of Finance, person-to-person (P2P) UPI transactions will remain completely free, regardless of the amount transferred. Payments made to merchants up to ₹2,000 will also remain free.
The new MDR will apply to specified merchant transactions above ₹2,000. Importantly for NRIs, the government has clarified that MDR is a merchant-side charge and not a fee imposed directly on customers making UPI payments.
Banks have been advised to ensure that merchants do not pass the MDR on to customers, while UPI apps cannot impose platform fees or hidden charges for these payments, the Finance Ministry said.
Will NRIs have to pay for sending money to families in India?
No, not if the transaction is a person-to-person UPI transfer.
{{/usCountry}}No, not if the transaction is a person-to-person UPI transfer.
{{/usCountry}}The new framework leaves all P2P transactions outside the MDR system. An NRI transferring money through UPI to a family member or another individual will therefore not face the new MDR simply because the amount is above ₹2,000, according to the Finance Ministry's UPI clarification.
This distinction is important because the ₹2,000 threshold applies to merchant payments, not ordinary person-to-person transfers.
What if an NRI uses UPI to pay a shop?
This is where the new framework becomes relevant.
From October 15, a 0.4% MDR will apply to specified UPI payments to merchants above ₹2,000. For transactions of ₹75,000 or more, the MDR will be capped at ₹300 per transaction, the Finance Ministry said.
However, the NRI making the payment is not supposed to be charged this amount separately. The government has said customers will not pay MDR and merchants cannot pass the charge on to them.
Payments to eligible small merchants under the zero-MDR framework will also remain free.
Can NRIs continue using UPI in India?
Yes, subject to their bank's terms and the availability of the facility.
The National Payments Corporation of India (NPCI) says NRIs with NRE or NRO accounts can use UPI, including through supported international mobile numbers.
Also read: ‘No human right to illegal immigration’: Trump says UN nations have right to remain sovereign
The facility requires the international mobile number to be linked with the bank account and is available through UPI apps that support international numbers. NPCI says transactions are subject to the respective bank's terms and conditions.
For NRIs visiting India, this means UPI can continue to be used for eligible payments even after the new MDR framework takes effect.
What about larger or special-category payments?
The standard 0.4% MDR will not apply uniformly to every transaction above ₹2,000.
The Ministry of Finance notification specifies a ₹5 flat MDR for certain essential sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, for transactions above ₹2,000.
Capital-market transactions involving mutual funds, securities, stockbrokers and dealers will have an MDR of 0.02%, capped at ₹300, according to the government.
The Finance Ministry has said about 96% of merchant transactions will remain unaffected by the new framework, while all P2P transactions will continue to remain outside the MDR system.
What NRIs should remember
For NRIs using UPI in India, the key distinction is between sending money to another person and paying a merchant.
P2P transfers remain free irrespective of the amount. Specified merchant payments above ₹2,000, meanwhile, will come under the new MDR framework from October 15.
The government has also clarified that the MDR is not a tax or a government fee. It is distributed among participants in the payment ecosystem to support the operation and expansion of UPI.