The Supreme Court on Monday refused to grant an interim stay on the Union government’s upcoming fee structure that levies a Merchant Discount Rate on select person-to-merchant UPI payments exceeding Rs 2,000.
While issuing notice on a public interest litigation challenging the policy, the bench turned down the petitioner’s request to suspend the rules pending government responses, observing that the matter was technical rather than legal in nature.
The petition, filed by advocate Anjan Datta according to PTI reports, contested the Centre’s decision to reintroduce commercial processing fees on specified digital transactions.
Centre Defends Policy Scope in Court
Appearing on behalf of the central government, Additional Solicitor General N Venkataraman informed the bench that 96 per cent of UPI users would remain completely exempt from the new fee structure.
The rollout, unveiled on Tuesday, September 15, marks the end of nearly six years of a zero-MDR regime for specified transactions. The new framework is scheduled to take effect from October 15.
Merchant Discount Rate represents the fee businesses pay to digital transaction enablers, including acquiring banks, payment service providers, and third-party applications.
Fee Slabs and Sectoral Concessions
Under the revised structure, person-to-merchant UPI payments above Rs 2,000 will attract a standard 0.4 per cent MDR. The charge is subject to an upper limit of Rs 300 for transactions valued at Rs 75,000 and higher.
The policy also carves out exceptions for specific sectors operating on narrow margins or providing essential utilities. Transactions exceeding Rs 2,000 in fuel, railways, telecommunications, insurance, and agricultural inputs will incur a flat fee of Rs 5 per transaction rather than the percentage-based charge.
Investments and trading services—such as transactions involving mutual funds, securities, stockbrokers, and dealers—will carry a reduced MDR of 0.02 per cent, which is also capped at Rs 300.
Safeguards for Consumers and Peer Transfers
The framework is designed to operate exclusively within the business side of the payment ecosystem without affecting end consumers. The Finance Ministry has advised banking institutions to prevent merchants from passing these expenses along to customers, while expressly prohibiting UPI application developers from levying platform fees or covert surcharges.
Furthermore, standard person-to-person transfers will continue without any charges, regardless of the transaction amount. These peer transfers account for approximately 37 per cent of all UPI transaction volumes and represent around 70 per cent of total transaction value.
