UPI Fee Row Reaches SC: Court Questions New MDR, But Refuses Interim Stay

The Supreme Court on Monday sought responses from the Centre, Reserve Bank of India (RBI), National Payments Corporation of India (NPCI) and others on a plea challenging the new Merchant Discount Rate (MDR) on specified UPI merchant payments above Rs 2,000.

A bench headed by Chief Justice of India Surya Kant and comprising Justices Joymalya Bagchi and V Mohana issued notices on the PIL filed by advocate Anjan Datta, but refused to stay the new charges pending the hearing. The respondents have been given four weeks to file their replies.

The new framework is scheduled to take effect from October 15, with a 0.4 per cent MDR on specified person-to-merchant UPI transactions above Rs 2,000. The charge will be capped at Rs 300 for payments of Rs 75,000 and above.

During the hearing, Justice Bagchi questioned the nature and legal basis of the levy, while the bench observed that the issue appeared “less a legal and more a technical” one.

Additional Solicitor General N Venkataraman, appearing for the Centre, told the court that 96 per cent of users were exempt. The government has maintained that MDR is neither a tax nor money collected by it or NPCI, but a charge distributed among participants in the payments ecosystem to support the long-term sustainability of UPI.

The framework leaves person-to-person payments completely free, irrespective of amount. Merchant payments up to Rs 2,000 also remain free, while specified small merchants receiving up to Rs 1 lakh a month through UPI QR codes are exempt.

Essential sectors such as fuel, railways, telecom, insurance and agricultural inputs will face a flat Rs 5 MDR above Rs 2,000. Mutual funds, securities and stock-market transactions will attract 0.02 per cent, capped at Rs 300.

Petrol pump dealers have separately sought exemption, citing their regulated margins. The PIL also questions the legal framework and the differing treatment of UPI and RuPay debit-card transactions.

The Supreme Court will examine the challenge after receiving the Centre and other respondents’ affidavits.