Supreme Court PIL Challenges 0.4% MDR On UPI Transactions Above ₹2,000 Before October 15 Rollout

A public interest litigation has been submitted to the Supreme Court, disputing the central government’s move to levy a merchant discount rate (MDR) on certain person-to-merchant UPI transactions exceeding Rs 2,000. The petition argues that the charge was rolled out without proper legal safeguards, sufficient transparency, or meaningful public consultation.

UPI MDR framework challenged

Effective from October 15, the government has set a 0.4 per cent charge on UPI payments surpassing Rs 2,000 made to merchants. Under this arrangement, an MDR of 0.4 per cent will apply to person-to-merchant transactions above Rs 2,000, while UPI transactions up to Rs 2,000 will remain MDR-free.

The petition was filed by advocate Anjan Datta, contesting the Centre’s notification dated September 14 and the MDR framework unveiled on September 15, which is reported to take effect from October 15.

As per the petition, the new structure prescribes a 0.4 per cent MDR on standard person-to-merchant UPI transactions above Rs 2,000, with a maximum limit of Rs 300 for transactions valued at Rs 75,000 or more.

It also lays out a flat MDR of Rs 5 for transactions above Rs 2,000 in designated essential and low-margin sectors such as railways, telecommunications, insurance, fuel, and agricultural inputs. Capital-market transactions, on the other hand, would attract an MDR of 0.02 per cent, subject to a cap of Rs 300.

Petitioner’s objections

According to the petitioner, UPI transactions up to Rs 2,000 and all person-to-person transfers will continue to be free of charge, and small merchants earning up to Rs 1 lakh per month via UPI QR codes have been exempted.

The petition challenges the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007, claiming it grants the executive unchecked authority to determine which electronic payment modes qualify for the no-charge exemption.

It further raises questions over how the rates, transaction thresholds, caps, and sectoral classifications were determined, noting that these were reportedly announced through a press release. The petitioner alleges that the complete document specifying these charges has not been formally published in the Official Gazette.

Concerns over impact

The petitioner has also raised doubts about the differential treatment of UPI transactions and RuPay debit-card payments, highlighting that the notification retains the no-charge benefit for RuPay debit cards without any monetary limit.

The petition claims the framework is arbitrary and discriminatory, and could negatively impact merchants operating on thin margins. It also flags the risk of an indirect burden on consumers and potential digital exclusion.

The petitioner has requested the quashing or suspension of the framework in so far as it imposes an MDR on UPI transactions exceeding Rs 2,000. As an alternative, the petition calls for a reassessment of the framework through transparent consultation, publication of empirical data, and a thorough impact assessment, along with protective measures for micro and small enterprises.

The plea further seeks an independent review by the Reserve Bank of India (RBI) and the Union government.