The Supreme Court will on Monday hear a Public Interest Litigation (PIL) challenging the Centre’s decision to introduce a Merchant Discount Rate (MDR) on specified UPI payments above ₹2,000 made to merchants.
The new framework, announced by the government in September, is scheduled to come into effect from October 15, 2026. Under the framework, a 0.4% MDR will apply to specified person to merchant (P2M) UPI transactions above ₹2,000, with the charge capped at ₹300 for transactions of ₹75,000 and above.
What Will Remain Free?
- The government has said that person to person (P2P) UPI transactions will continue to remain free, regardless of the amount.
- UPI merchant payments of ₹2,000 or below will also remain outside the MDR framework. Consumers are not supposed to be directly charged the MDR, with banks instructed not to pass the charge on to customers.
Special Rates for Certain Sectors
The framework provides different rates for some categories:
- Railways, telecom, insurance, fuel and agricultural inputs: ₹5 MDR on eligible transactions above ₹2,000.
- Mutual funds, securities and transactions through stockbrokers/dealers: 0.02% MDR, capped at ₹300.
- Other specified merchant transactions above ₹2,000: 0.4% MDR, subject to the applicable cap.
What Does the Petition Say?
- The PIL has been filed by advocate Anjan Datta. It challenges the Centre’s September 14 notification and the MDR framework announced on September 15.
- The petition argues that the new levy was introduced without adequate statutory safeguards, transparency and public consultation. It also challenges the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007.
- The petitioner has sought the quashing or suspension of the MDR framework. Alternatively, the plea seeks reconsideration after consultation, publication of relevant data and an impact assessment, along with safeguards for micro and small businesses.
Supreme Court Hearing
- The matter is scheduled before a bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V. Mohana.
- The hearing will determine the next stage of the legal challenge. The Supreme Court has not yet ruled on the validity of the new MDR framework.
Retailers Announce Protest
- The issue has also drawn opposition from sections of the retail industry. The All India Mobile Retailers Association (AIMRA) has announced a “No UPI Day” on October 2, with participating mobile retailers expected to temporarily stop accepting UPI payments as a protest against the proposed MDR.
- The case is being closely watched because any change to UPI’s merchant payment cost structure could have implications for India’s rapidly expanding digital payment ecosystem.
