The Supreme Court today refused to stay the Centre’s decision to impose merchant discount rate (MDR) charges on select UPI payments exceeding ₹2,000, while seeking responses from the government, RBI, and NPCI on the legal basis of the levy. The MDR framework is set to take effect from October 15, according to inc42.com.
The court, led by Chief Justice Surya Kant and Justices Joymalya Bagchi and V Mohana, heard a public interest litigation filed by advocate Anjan Datta challenging the MDR policy. The petition argued that the levy could strain merchants’ working capital, encourage payment splitting to avoid charges, and increase consumer prices. It also questioned the ₹2,000 transaction threshold and ₹1 lakh monthly receipt limit for merchant exemptions, citing lack of disclosed data or methodology behind these limits. Additional Solicitor General N Venkataraman informed the court that peer-to-peer UPI transfers would remain free and approximately 96% of merchant transactions would not be affected.
The petition highlighted a disparity between UPI MDR charges and RuPay debit card payments, which continue to enjoy zero charges without any monetary ceiling. For example, a ₹2,001 UPI transaction would attract MDR while a ₹2,000 payment would not, potentially influencing merchant behavior. The case raises concerns about the impact of MDR on digital payment adoption and merchant willingness to accept UPI payments, amid India’s growing push for digital transactions.
The Supreme Court has directed the Centre, RBI, and NPCI to file their responses within four weeks. The MDR charges on UPI transactions above ₹2,000 are scheduled to be implemented starting October 15, marking a key moment in India’s digital payments regulation.