Framework proposes MDR on certain high-value UPI transactions above Rs 2,000; Centre says charges will begin from October 15
New Delhi:
The Supreme Court on Monday declined to grant an immediate stay on the recently introduced framework providing for Merchant Discount Rate (MDR) on certain high-value Unified Payments Interface (UPI) transactions above Rs 2,000. The court, however, issued notices and sought responses from the Central government and other concerned authorities within four weeks.
A bench headed by Chief Justice of India Surya Kant, along with Justices Joymalya Bagchi and V. Mohana, sought responses from the Central government, Reserve Bank of India (RBI), National Payments Corporation of India (NPCI), and the UPI and Services Steering Committee.
The petition, filed through advocate Anjan Dutta by advocate Ashutosh Dubey, challenges the Centre’s September 14, 2026 Gazette notification issued under Section 10A of the Payment and Settlement Systems Act, 2007. It also challenges the framework announced on September 15 for imposing MDR on certain person-to-merchant (P2M) UPI transactions above Rs 2,000.
Centre Says Charges Will Apply From October 15
Appearing for the Centre, Additional Solicitor General N. Venkataraman told the court that the proposed charges would come into effect from October 15 and that around 96 per cent of transactions would remain outside the charge structure.
He said the charge for essential services would be capped at Rs 5. According to the Centre’s submissions, the proposed fee is a settlement charge between payment aggregators and banks, and the government would not receive any share from it.
The Centre also argued that banks incur costs while processing electronic transactions and that credit and debit card payments already involve charges, whereas UPI transactions have so far remained free of such fees.
Petitioner Questions Rs 2,000 Threshold
The petitioner has described the framework as arbitrary and discriminatory and has challenged the manner in which the proposed financial burden would be created and distributed.
The petition questions several provisions, including the Rs 2,000 transaction threshold, Rs 1 lakh monthly-receipt classification, sector-specific rates and prescribed caps. It also raises questions over the distinction between a Rs 2,000 transaction and a Rs 2,001 transaction, arguing that the latter would attract a percentage-based charge while the former would not.
The petitioner has also challenged the role of the UPI and Services Steering Committee in determining rates and classifications, arguing that such decisions should be governed by clear legislative policy, standards, publication requirements and regulatory oversight.
Petition Challenges Proposed 0.4% MDR
The petition challenges the proposed 0.4 per cent MDR on certain P2M UPI transactions above Rs 2,000. It also refers to a proposed charge cap of Rs 300 for transactions of Rs 75,000 and above, along with different rates for certain sectors.
The petitioner has sought records relating to the decision, including details concerning the legal basis, constitution and powers of the UPI and Services Steering Committee, its decisions and meetings, and the legal basis for determining and distributing MDR among participants in the private payments ecosystem.
An interim stay on implementation was also sought, but the Supreme Court declined to grant such relief at this stage.
Government Says UPI for Consumers Will Remain Free
The Centre has said the revised framework is intended to support the financial sustainability of the UPI ecosystem. According to the government, a limited fee on higher-value merchant transactions could help generate funds for payment infrastructure, cybersecurity and support for small merchants in Tier-3 and Tier-4 cities and rural areas.
The government has maintained that UPI will remain free for consumers, while person-to-person transactions will continue to be free regardless of the transaction amount.
It has also said that merchants earning up to Rs 1 lakh per month through UPI QR codes would not face charges, while more than 95 per cent of merchant payments below Rs 2,000 would remain free.
The RBI has similarly described the proposed MDR framework for higher-value UPI transactions as a measure aimed at strengthening the long-term sustainability of the digital payments ecosystem, while maintaining that UPI transactions will remain free for users.
