MDR on UPI over Rs 2000: SC refuses stay; issues notices to govt, RBI, NPCI

MDR on UPI over ₹2,000: The Supreme Court has issued a notice to the government as well as the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) in the UPI Merchant Discount Rate (MDR) case. It was hearing a plea challenging the Centre’s decision to impose a MDR on specified UPI person-to-merchant transactions of over ₹2,000.

The apex court bench including Justices Joymalya Bagchi and V Mohana, headed by Chief Justice of India Surya Kant, declined to put a stay on MDR implementation on Monday, as mentioned in a report in The Economic Times. It has asked for clarification from the government, the RBI and NPCI on the legal basis for UPI MDR charges.

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Additional Solicitor General N Venkataraman said that the UPI MDR is not a tax or a fee. He said that 96 per cent of the gateway users are exempted from the norms. And among the persons, essential services are capped at ₹5.

"There's a cost for doing debit/credit card transactions. UPI is not different. Two operators provide the service. One is the banks. It is not a statutory collection by the government of India. It's a settlement fee amongst the players, which NPCI facilitates. The government is not taking a rupee of this,” he said.

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CJI Surya Kant said the government should place these details on affidavit. He also added that the matter appeared to be “more of a technical issue”.

Justice Joymalya Bagchi asked what MDR was, if not a fee. “It’s not a fee, then what is the character? Charge of 1% on 140 crore Indians,” he said.

The government ended nearly six years of fully free UPI payments by introducing a 0.4 per cent fee on transfers above ₹2,000 made to merchants through the UPI platform from October 15. Everyday person-to-person transactions and small payments will not be charged. The Merchant Discount Rate (MDR) will be capped at ₹300 for payments of ₹75,000 and above.

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Essential and thin-margin sectors such as railways, telecom, insurance, fuel, and agricultural inputs will pay a flat MDR of ₹5 per transaction above ₹2,000. Payments into mutual funds, securities, and through stockbrokers and dealers will attract a 0.02 per cent MDR, also capped at ₹300.