The Supreme Court on Monday issued notices to the Centre, the Reserve Bank of India (RBI), and other respondents on a public interest litigation (PIL) challenging the government’s decision to impose a Merchant Discount Rate (MDR) on specified UPI person-to-merchant transactions exceeding Rs 2,000.
A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V. Mohan agreed to examine the petition and directed the respondents to file their counter affidavits within four weeks.
However, the court declined to grant interim relief by staying the implementation of the MDR framework. During the hearing, counsel appearing for the petitioner requested a temporary suspension of the policy until the matter is decided. The bench refused the request and observed that the issue appeared to be “more technical than legal.”
Representing the Centre, Additional Solicitor General N. Venkataraman told the court that around 96 percent of UPI users remain outside the scope of the charge and would continue to be exempt from the MDR provision.
The PIL was filed by advocate Anjan Dutta, who challenged the government’s decision to introduce charges on certain UPI merchant transactions after nearly six years of a completely free digital payments regime. Under the policy, a 0.4 percent MDR will be applicable from October 15 on UPI-based payments above Rs 2,000 made to merchants through the platform.
The government has clarified that regular person-to-person (P2P) transfers and smaller-value transactions will continue to remain free of charge. In addition, MDR on transactions of Rs 75,000 and above will be capped at Rs 300.
For sectors classified as essential or operating on relatively low margins, including railways, telecommunications, insurance, fuel, and agricultural inputs, a fixed MDR of Rs 5 will apply on each transaction above Rs 2,000.
The policy also provides a separate MDR structure for payments made through mutual funds, securities, share brokers, and dealers. Such transactions will attract an MDR of 0.02 percent, subject to a maximum charge of Rs 300.
The government has maintained that person-to-person UPI transfers will continue to attract zero charges regardless of transaction size. According to information presented in the matter, these transfers account for 37 percent of UPI transaction volume and nearly 70 percent of the total value processed through the platform.
With notices now issued, the Centre, RBI, and other respondents are required to submit their replies within four weeks, after which the Supreme Court will take up the matter for further consideration.