UPI MDR row reaches SC: Plea against merchant charges on payments above ₹2,000 to be heard on Monday
The Supreme Court is scheduled to hear on Monday a plea challenging the Centre’s decision to introduce a merchant discount rate (MDR) on certain person-to-merchant UPI transactions above ₹2,000, PTI reported.
The case comes as the government moves to change the zero-MDR framework that has applied to UPI payments for nearly six years.
Under the new framework, a 0.4% charge will apply to transfers made to merchants worth over ₹2,000 from October 15. However, person-to-person UPI transfers and small merchant payments will continue to remain free.
What does the PIL allege
According to the apex court’s cause list of September 28, the plea would come up for hearing before a bench of Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana, the news report stated.
UPI MDR has been a subject of debate since the government’s September 14 notification and the MDR framework announced on September 15. Several public figures, including industry leaders, have weighed in on the merchant charges.
The public interest litigation (PIL), filed by advocate Anjan Datta, alleges that the levy has been introduced without adequate statutory safeguards, transparency or public consultation, according to the agency report.
It also challenges the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007, arguing that it gives the executive unguided discretion to decide which electronic payment modes qualify for the no-charge protection.
The petitioner has also questioned the distinction between UPI and RuPay debit card transactions, noting that the notification retains the no-charge protection for RuPay debit cards without any monetary ceiling.
‘Indirect burden on consumers’
The plea further argues that the framework is arbitrary and discriminatory and could adversely affect merchants, particularly those operating on low margins.
It also raises concerns about a potential indirect burden on consumers and the risk of digital exclusion.
According to a government statement published on September 15, MDR is a charge within the merchant payment ecosystem, and hence does not apply to customers making UPI payments. Banks have also been strictly advised to ensure that merchants do not pass MDR charges on to customers.
What does the plea seek?
The PIL seeks the quashing or suspension of the framework insofar as it imposes an MDR on UPI transactions of above ₹2,000.
Alternatively, it has sought a reconsideration of the framework through a transparent consultation process, backed by the publication of empirical data and an impact assessment. It has also sought safeguards for micro and small enterprises, PTI reported.
“Direct that any future MDR classification be based on relevant considerations including merchant turnover, statutory MSME status, actual margins, geography and ability to bear the cost, and avoid cliff-edge treatment unsupported by evidence,” the plea said.
It has made the central government and others, including the Reserve Bank of India (RBI), as party respondents in the matter.
How MDR charges will be rolled out in India
Under the new framework, an MDR of 0.4% will apply to specified merchant transactions above ₹2,000. For transactions of ₹75,000 and above, the charge will be capped at ₹300 per transaction.
Additionally, transactions above ₹2,000 in essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will attract a flat MDR of ₹5 per transaction.
A separate, much lower MDR of 0.02% will apply to capital-market-related UPI payments, also capped at ₹300 per transaction. This category includes transactions involving mutual funds, securities, stock brokers and dealers.
