Supreme Court Refuses to Stay UPI MDR Above ₹2,000, Seeks Explanation from Centre

The Supreme Court on Monday refused to grant interim relief against the Centre’s decision to introduce a Merchant Discount Rate (MDR) on specified Unified Payments Interface (UPI) transactions above ₹2,000. The matter was heard by a Bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V. Mohana in a Public Interest Litigation filed by advocate Anjan Datta in Anjan Datta v. Union of India & Ors.

While declining to stay the implementation of the framework at this stage, the Bench sought an affidavit from the Centre explaining the factual and legal basis for imposing the MDR. During the hearing, questions were raised regarding the nature of the levy and the legal justification for imposing such a charge. Justice Joymalya Bagchi questioned the government on whether the MDR was a tax or a fee and, if treated as a fee, what service was being provided in return. The questions assume significance as the petition challenges the legal basis of the new payment framework.

Under the framework announced in September, a 0.4% MDR is proposed on specified person-to-merchant (P2M) UPI transactions exceeding ₹2,000, with the charge capped at ₹300 per transaction for payments of ₹75,000 and above. The framework is scheduled to come into effect from October 15, 2026. Person-to-person UPI transfers will continue to remain free. The government has also told the Court that approximately 96% of merchant transactions would remain unaffected by the new framework.

The PIL challenges the Centre’s September 14 notification and the subsequent MDR framework, raising questions concerning the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007. The petitioner has argued, among other things, that the framework creates a compulsory financial burden without an adequately disclosed empirical or cost-based foundation and raises concerns under Articles 14 and 19(1)(g) of the Constitution.

The government, however, has maintained that the revised framework will continue to keep UPI free for consumers and that the MDR applies only to specified merchant-side transactions. The Supreme Court has not finally adjudicated the constitutional validity of the framework. The Centre, RBI and other concerned authorities are now required to place their response before the Court, after which the legal challenge to the new MDR regime will be considered further.