The Supreme Court is scheduled to hear on Monday, September 28, a public interest litigation challenging the new Merchant Discount Rate (MDR) framework for certain UPI person-to-merchant (P2M) transactions above ₹2,000.
The new framework, notified for implementation from October 15, 2026, provides for a 0.4% MDR on specified P2M UPI transactions above ₹2,000. The charge is subject to a maximum of ₹300 for transactions of ₹75,000 and above. The government has clarified that person-to-person UPI payments will continue to remain free.
According to the Supreme Court’s September 28 cause list, the petition filed by advocate Anjan Datta is listed before a bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V. Mohana.
What Is the New UPI MDR Framework?
The new system applies the 0.4% MDR only to specified merchant transactions above ₹2,000. Payments up to ₹2,000 remain outside the MDR framework, while person-to-person transfers continue to be free regardless of the amount. The government has also said that approximately 96% of P2M transactions will remain unaffected.
For transactions of ₹75,000 or more, the MDR is capped at ₹300 per transaction. Certain sectors, including railways, telecom, insurance, fuel and agricultural inputs, have been placed under a flat MDR of ₹5 for eligible transactions above ₹2,000. Capital-market transactions involving mutual funds, securities and stockbrokers or dealers carry a 0.02% MDR, also subject to a ₹300 cap.
The MDR is a merchant-side charge rather than a direct UPI transaction fee for customers. The Finance Ministry has said the framework is intended to support the operation and expansion of the UPI payment ecosystem.
What Does the Supreme Court Petition Say?
The PIL challenges the Centre’s September 14 notification and the MDR framework announced on September 15. The petition questions the legal basis and process through which the new charges were introduced.
The petitioner has argued that the framework was introduced without adequate statutory safeguards, transparency and public consultation. It also challenges the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007.
According to the petition, the amended provision gives the executive broad discretion to determine which electronic payment methods should receive protection from charges. The plea has asked the court to hold that an MDR or similar compulsory charge should not be imposed solely on the basis of a press release or FAQs without an appropriately authorised and published statutory instrument.
Petition Questions UPI and RuPay Treatment
The plea has also raised questions about the different treatment of UPI and RuPay debit-card transactions. It points out that the existing no-charge protection for RuPay debit cards continues without a monetary ceiling, while the new framework introduces a threshold for specified UPI merchant payments.
The petitioner has described the distinction as arbitrary and discriminatory and has raised concerns about its possible effect on merchants, particularly businesses operating on low margins. The petition also raises the possibility of an indirect burden on consumers and concerns about digital exclusion. These are arguments made by the petitioner and have not been established by a court.
The petition seeks the quashing or suspension of the MDR framework to the extent that it applies to UPI transactions above ₹2,000. Alternatively, it asks for the framework to be reconsidered following transparent consultation, publication of relevant empirical data and an impact assessment, along with safeguards for micro and small enterprises.
What Happens Next?
The Supreme Court hearing on September 28 will consider the legal challenge to the new MDR framework. The petition has also asked that any future MDR classification take factors such as merchant turnover, MSME status, actual profit margins, geographical conditions and the ability of businesses to bear the cost into account.
The Centre and other parties, including the Reserve Bank of India, have been named as respondents in the case.
Unless the court directs otherwise, the new MDR framework is scheduled to come into effect from October 15, 2026. The outcome of the Supreme Court proceedings will determine the next stage of the legal challenge.
Disclaimer: This article explains the UPI MDR framework and the arguments raised in the pending Supreme Court petition for informational purposes. Statements regarding the legality, constitutionality or potential impact of the framework are attributed to the petitioner and should not be treated as judicial findings. Readers should refer to official government, NPCI and Supreme Court updates for the latest developments.