Supreme Court Refuses Stay On Imposing MDR For UPI Payments Exceeding ₹2,000

The Supreme Court on Monday declined to stay the Centre’s decision to introduce a 0.4 per cent Merchant Discount Rate (MDR) on specified person-to-merchant (P2M) UPI transactions above Rs 2,000, but issued notice to the Union government and sought a detailed affidavit explaining the framework. The new charge is scheduled to take effect from October 15. A bench led by Chief Justice of India Surya Kant, with Justices Joymalya Bagchi and Vipul M Pancholi, said it was not inclined to grant interim relief at this stage. The court directed the Centre to place all relevant facts before it through an affidavit, while the petition filed by advocate Anjan Datta remains pending.

The public interest litigation challenges the Centre’s September 14 notification and the subsequent MDR framework announced on September 15. It seeks the quashing of the levy on commercial UPI transactions exceeding Rs 2,000, arguing that the move was introduced without adequate statutory safeguards, transparency or public consultation. Under the revised framework, a 0.4 per cent MDR will apply only to specified UPI merchant payments above Rs 2,000. For transactions of Rs 75,000 and above, the charge will be capped at Rs 300 per transaction. UPI payments up to Rs 2,000 will continue to attract zero MDR.

The Centre has said the MDR is not a government tax or a charge on consumers. According to the government, the fee will be shared among payment ecosystem participants, including banks, payment service providers and UPI application providers. It has also maintained that person-to-person UPI transfers will remain free irrespective of the amount. The petitioner contended that UPI had helped curb black money and promote digital payments, and argued that the fresh charges could discourage digital transactions. The plea also questioned the distinction drawn between UPI transactions and RuPay debit-card payments, and alleged that merchants could eventually pass the cost on to consumers despite official assurances.

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The framework exempts small merchants classified under the person-to-person merchant category, typically including street vendors, small shopkeepers and local businesses receiving less than Rs 1 lakh per month through UPI. Such merchants will continue to enjoy a mandatory zero-MDR structure. For certain essential and thin-margin sectors — railways, telecom services, insurance and fuel — the framework prescribes a flat MDR of Rs 5 per transaction above Rs 2,000, instead of the 0.4 per cent rate. Payments involving mutual funds, securities and stockbrokers will attract a lower MDR of 0.02 per cent, also capped at Rs 300.

The Centre’s move ends more than six years of zero-cost UPI payments for specified high-value merchant transactions. The government has said the charge is intended to sustain the payments ecosystem, while critics argue that it may affect merchant adoption and consumer choice. The Supreme Court is expected to examine the Centre’s affidavit and the constitutional and statutory grounds raised in the petition in the coming hearings. Until any further order, the October 15 rollout of the 0.4 per cent MDR framework remains on course.

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