PIL filed in Supreme Court against new UPI MDR

A public interest litigation (PIL) has been filed in the Supreme Court challenging the Centre's decision to impose a merchant discount rate (MDR) on specified UPI person-to-merchant (P2M) transactions above ₹2,000, reported by news agency PTI on Wednesday.

The plea, filed by advocate Anjan Datta, challenges the Centre's September 14 notification and the MDR framework announced on September 15. The new framework is scheduled to come into effect from October 15.

Under the framework, a 0.4 per cent MDR will apply to general P2M UPI transactions above ₹2,000, subject to a maximum charge of ₹300 for transactions of ₹75,000 and above. UPI payments up to ₹2,000 will continue to remain free.

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According to the petition, a flat MDR of ₹5 will apply to transactions above ₹2,000 in specified essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs. Capital-market transactions will attract an MDR of 0.02 per cent, capped at ₹300.

The petitioner has also pointed out that person-to-person UPI transfers will remain free. Small merchants receiving up to ₹1 lakh per month through UPI QR codes have also been exempted from the proposed MDR framework, according to PTI.

The plea challenges the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007. It alleges that the provision gives the executive unguided powers to determine which electronic payment modes should receive protection from charges.

The petitioner has further questioned how the transaction thresholds, MDR rates, caps and sector-specific classifications were determined. The plea alleges that the complete operative instrument prescribing the charges has not been published in the Official Gazette and argues that the framework was announced without adequate transparency or public consultation.

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Another issue raised in the petition is the distinction between UPI and RuPay debit-card transactions. The petitioner has pointed out that the notification continues to provide no-charge protection to RuPay debit-card transactions without a monetary ceiling.

The plea argues that the new framework is arbitrary and discriminatory and could particularly affect merchants operating on low margins. It also raises concerns about the possibility of the additional cost being passed on indirectly to consumers and its potential impact on digital payments adoption.

(With inputs from PTI)