Archive · 28 Sep 2026
Supreme Court Refuses Stay on October 15 UPI MDR Rollout
The Supreme Court is examining a new rule about some UPI payments made to businesses.
Under the rule, certain business payments above Rs 2,000 may have a charge called MDR.
The charge is usually 0.4%, but it has limits and special rates for some sectors.
Payments between people and many smaller shop payments will remain free.
The government says customers will not be charged separately and that most UPI merchant payments will not be affected.
It also says the money will stay within the payment system to help banks and payment companies cover costs.
A lawyer has challenged the rule, saying the government did not provide enough legal safeguards or public explanation.
The court has asked the government and payment authorities to respond but has not stopped the rule for now.
The Supreme Court sought responses from the Centre, RBI, NPCI and other respondents within four weeks on a petition challenging UPI MDR.
The court refused to temporarily halt the framework, which is scheduled to begin on October 15.
A 0.4% MDR will apply to specified person-to-merchant UPI transactions above Rs 2,000, capped at Rs 300 for payments of Rs 75,000 or more.
Railways, telecom, insurance, fuel and agricultural-input payments above Rs 2,000 will carry a flat Rs 5 MDR, while capital-market payments will attract 0.02%.
The Centre says the charge is paid within the payment ecosystem, not to the government, while the petitioner argues that the framework lacks adequate safeguards, transparency and consultation.
- Who
- The Supreme Court, the Centre, the Reserve Bank of India, the National Payments Corporation of India, the UPI and Services Steering Committee, and petitioner advocate Anjan Datta.
- What
- The court agreed to hear a challenge to the Merchant Discount Rate framework for specified UPI merchant payments but refused an interim stay.
- When
- The hearing took place on Monday; the framework is scheduled to take effect on October 15, and respondents have four weeks to file responses.
- Where
- India, in relation to payments made through the Unified Payments Interface.
- Why
- The petition alleges that the MDR framework lacks adequate statutory safeguards, transparency, public consultation, disclosed methodology and impact assessment.
Petitioner’s objections
Centre and industry rationale
Legal foundation and transparency
Petitioner’s objections
The petitioner calls the framework arbitrary and discriminatory, questioning its statutory basis, delegated decision-making, classifications, rates, thresholds and the absence of disclosed data, methodology and safeguards.
Centre and industry rationale
The Centre maintains that MDR is a settlement or service charge within the payment ecosystem rather than a government tax or fee, and has been asked to provide its formal response.
Impact on merchants and consumers
Petitioner’s objections
The petition says the levy could burden small, thin-margin businesses and lead to costs being passed on to consumers, seeking suspension or a review with safeguards for micro and small enterprises.
Centre and industry rationale
The Centre says users will not be charged separately, person-to-person payments will remain free, and most UPI merchant transactions will be unaffected.
Sustainability of UPI
Petitioner’s objections
The petitioner does not challenge the goal of maintaining a secure digital-payments system but questions how costs were created and distributed without a disclosed cost study and impact assessment.
Centre and industry rationale
The Centre and RBI say the framework is intended to support the long-term financial sustainability and efficient functioning of UPI, including payment infrastructure and cybersecurity.
- Standard MDR
- 0.4% on specified person-to-merchant UPI transactions above Rs 2,000.
- MDR ceiling
- Rs 300 for transactions of Rs 75,000 and above.
- Essential-sector rate
- Rs 5 per qualifying transaction in railways, telecom, insurance, fuel and agricultural inputs.
- Capital-market rate
- 0.02% for payments involving mutual funds, securities, stockbrokers and dealers, capped at Rs 300.
- Exempt payments
- Person-to-person transfers and merchant payments within the specified exemptions remain free.
- Small merchants
- The government says merchants receiving up to Rs 1 lakh per month through UPI QR codes will continue to pay no charges.
- Estimated impact
- The Centre says about 96% of UPI merchant transactions, or users of the gateway according to one account, will remain unaffected.
Sources
Supreme Court Seeks RBI, NPCI Response On 0.4% UPI MDR Rule, Refuses To Stay Oct 15 Rollout
SC refuses to stay MDR on UPI, seeks govt's reply
SC Seeks Centre, RBI Response On UPI MDR Challenge
SC refuses to stay MDR on UPI transactions above Rs 2,000, seeks centre, RBI, NPCI response
Supreme Court Refuses Stay On UPI Charges Above Rs 2,000. What It Means For You
