28 September,2026 01:52 PM IST | New Delhi | mid-day online correspondent
Supreme Court has sought responses from Centre, RBI and others on MDR on UPI payments. Supreme Court. File Pic
The Supreme Court on Monday issued notices to the government, the Reserve Bank of India (RBI) on a plea challenging the levy of Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions above Rs 2,000, reported news agency PTI.
The Court, however, refused to grant an interim stay on the Centre's decision to impose MDR from October 15.
A bench of Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana agreed to hear the plea and directed the Centre, the RBI and others to file their counter affidavits within four weeks, according to PTI.
Additional Solicitor General N Venkataraman, appearing for the government, told the bench that nearly 96 per cent of people using the gateway were exempt, as the charges are applicable to only person to merchant transactions above Rs 2,000.
"It is less a legal and more a technical issue," the bench observed.
A public interest litigation (PIL) was filed by advocate Anjan Datta. After the apex court issued notice and directed the respondents to file their counter affidavits, the counsel appearing for the petitioner requested the bench, "Please stay it till then."
The bench however refused this request.
The latest development comes amid retailers, stock brokers, traders and petrol dealers raising concerns against the MDR charges on UPI. Mobile phone retailers have said they will observe a no UPI day on October 2 to protest against the MDR charges. The Retailers Association of India had raised concerns on the MDR charges saying the move might prompt small retailers to switch to cash to avoid the cost burden.
The government had introduced 0.4 per cent charge on UPI payments above Rs 2,000 to merchants and capped the fee at Rs 300 for payments of Rs 75,000 and above, from October 15, thus ending nearly six years of fully free UPI payments.
Railways, fuel, telecom, bill payments and insurance have a flat fee of Rs 5 per transaction above Rs 2,000. Payments into mutual funds, securities and through stockbrokers and dealers will attract 0.02 per cent MDR, capped at Rs 300.
The Finance Ministry had said that since its launch the UPI has grown into the world's largest real-time interoperable payment system, processing 24.5 billion transactions in August 2026 alone. The new framework ensures resources from higher-value merchant transactions are reinvested to support small businesses and strengthen digital payments across the country, it said.
"To keep this system self-sustainable, secure and innovative, a small fee on high-value merchant transactions helps fund: better infrastructure and cybersecurity, support for small merchants in Tier III-VI towns and rural areas and, awareness and incentives to expand UPI adoption," it explained.
The government has clarified that the charges is not applicable for the customers using the digital payments system.
"Person-to-Person transfers are always free, regardless of amount. Vendors earning up to Rs 1 lakh per month via UPI QR codes continue to enjoy zero charges. Over 95 per cent of merchant payments are below Rs 2,000, these remain free," said the Finance Ministry had said.
(With inputs from PTI)
