New Delhi, 28 September (H.S.): The Supreme Court on Monday issued notices to the Centre, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI), seeking their responses to a petition challenging the government’s decision to impose a 0.4 per cent Merchant Discount Rate (MDR) on specified commercial transactions of more than Rs 2,000 through the Unified Payments Interface (UPI).

However, the Supreme Court has, for now, declined to stay the Centre’s decision to withdraw the legal protection providing for zero MDR on UPI transactions above Rs 2,000. The revised framework is scheduled to come into effect from October 15.

A Bench headed by Chief Justice of India Surya Kant heard the petition and issued notices to the Central Government, the RBI and the NPCI, seeking to know the basis for withdrawing the legal protection for zero MDR on UPI transactions. The court directed the respondents to file their responses within four weeks.

The petition has also questioned the differential treatment of UPI and RuPay debit cards, arguing that while transactions through RuPay debit cards continue to enjoy a zero-charge facility without any monetary limit, imposing charges on UPI transactions would be discriminatory. The Supreme Court’s current Chief Justice is Justice Surya Kant, who assumed office as CJI on November 24, 2025.

The petition, filed by advocate Anjan Datta, challenges the proposed levy on UPI transactions that is scheduled to take effect from October 15. It contends that a levy has been imposed on UPI payments exceeding Rs 2,000, while the same no-charge protection continues for RuPay-powered debit cards without any monetary threshold.

The petition challenges the imposition of mandatory payment costs across the country, arguing that the framework does not disclose adequate cost-related research, the methodology underlying the charges, or sufficiently robust safeguards to prevent the additional cost from ultimately being passed on to consumers.

The petition further states that although it has officially been indicated that merchants cannot pass the cost on to customers, such charges could eventually be incorporated into prices. This, it argues, could reduce merchants’ working capital or prompt low-margin businesses to refuse UPI payments or split transactions into multiple smaller payments.

The government has decided to implement the revised UPI transaction fee structure from October 15. A 0.4 per cent MDR will apply to specified person-to-merchant (P2M) UPI transactions exceeding Rs 2,000. The charge will not go directly into government revenue; instead, it will be collected as a service charge by banks and payment aggregators.

Notably, UPI payments had remained completely free for nearly six years. Under the new framework, person-to-person transactions and small-value payments will continue to remain free. The revised structure also provides for specified charges in certain sectors, including railways, insurance, telecommunications, fuel and agricultural inputs, while transactions involving mutual funds and securities investments will attract a lower MDR subject to prescribed limits.

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Hindusthan Samachar / Jun Sarkar