SC issues notice to NPCI, RBI on UPI MDR; refuses interim stay

The Supreme Court on Monday issued notices to the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) on a plea challenging the imposition of Merchant Discount Rate (MDR) on specified UPI person-to-merchant transactions above Rs 2,000, according to agency reports.The court, however, refused to grant an interim stay on the implementation of the new MDR framework, which is scheduled to come into effect from October 15.

STORY | SC notice to Centre, others on plea against imposition of MDR on UPI payments above Rs 2,000

The Supreme Court on Monday sought responses from the Centre and others on a petition challenging the decision to impose a Merchant Discount Rate (MDR) on specified UPI… pic.twitter.com/itcTqXnd7C

— Press Trust of India (@PTI_News) September 28, 2026

The Union government, RBI and NPCI have been directed to file their responses within four weeks.During the hearing, Solicitor General of India said no money from the MDR goes to the government. He said the "MDR is merely a service charge levied by aggregators and banks."Under the new framework, a 0.4% MDR will apply to specified UPI person-to-merchant transactions above Rs 2,000 from October 15. The MDR will be capped at Rs 300 for transactions of Rs 75,000 and above. Person-to-person UPI transfers and payments up to Rs 2,000 will remain outside the levy.
Essential and thin-margin sectors, including railways, telecom, insurance, fuel and agricultural inputs, will attract a flat MDR of Rs 5 per transaction above Rs 2,000. Payments involving mutual funds, securities, stockbrokers and dealers will attract a 0.02% MDR, capped at Rs 300.The PIL, filed by advocate Anjan Datta, challenged the Centre’s September 14 notification and the MDR framework announced on September 15. The plea alleged that the levy was introduced without adequate statutory safeguards, transparency or public consultation.It also challenged the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007, alleging that it gives the executive unguided powers to determine which electronic payment modes receive no-charge protection.The plea stated, "Declare that no MDR or analogous compulsory charge may be imposed or recovered merely on the strength of a press release or FAQs absent a duly authorised, authenticated and published statutory instrument."
According to agency reports,the petitioner has also questioned the distinction between UPI transactions and RuPay debit card payments, pointing out that the notification continues no-charge protection for RuPay debit cards without a monetary ceiling.The plea alleged that the framework is arbitrary and discriminatory and could adversely affect merchants, particularly those operating on low margins. It also raised concerns about a possible indirect burden on consumers and digital exclusion.It sought quashing or suspension of the MDR framework insofar as it imposes charges on UPI transactions above Rs 2,000. Alternatively, it sought reconsideration of the framework after transparent consultation, publication of empirical data and an impact assessment, along with safeguards for micro and small enterprises.The plea further sought that future MDR classifications consider factors such as merchant turnover, statutory MSME status, actual margins, geography and ability to bear the cost.The new MDR framework is set to mark a shift from UPI's zero-MDR model for specified merchant payments, which has been in place for nearly six years.