A Public Interest Litigation filed in India’s Supreme Court contests the recent government notification permitting Merchant Discount Rate (MDR) fees on certain UPI payments above Rs 2,000, alleging arbitrariness and constitutional violations that could hurt merchants and consumers alike.
- PIL claims MDR on UPI above Rs 2,000 violates constitutional equality protections
- Questions government’s data and legal basis for MDR fee and exemption thresholds
- Petition demands transparency, review, and safeguards for small businesses
What happened
A Public Interest Litigation was filed in the Supreme Court of India contesting the Finance Ministry’s September 14, 2026 notification and subsequent announcement allowing Merchant Discount Rate (MDR) charges on UPI person-to-merchant (P2M) transactions exceeding Rs 2,000. The MDR framework introduces a 0.4% fee capped at Rs 300 on P2M transactions above the threshold, with flat and sector-specific charges applied for sectors such as railways, insurance, and fuel.
The petition, brought by Advocate Anjan Datta, challenges multiple aspects of this framework including the arbitrary nature of the Rs 2,000 limit, the exempted monthly thresholds for small merchants, and the differing treatment compared to RuPay debit card transactions, which continue to receive no-charge protection without transaction limits.
Why it matters
The PIL raises concerns that the MDR charges could increase costs either directly or indirectly for both merchants and consumers, undermining the government’s push for digital payments adoption. It argues that the fee structure may force merchants to absorb charges, increase prices, or discourage higher-value UPI payments despite official restrictions on passing fees to customers.
Furthermore, the petition highlights the lack of transparency in how the government set the fee rates and thresholds, including the absence of published data or impact assessments. It also questions the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, which delegates broad powers to decide no-charge protections and MDR rates without clear guidelines or stakeholder consultation.
What to watch next
The Supreme Court’s response to this petition will be crucial, as it may lead to suspension or revision of the MDR framework pending further review. The government may also be prompted to publish the data and methodology used in crafting the MDR structure and reassess the impact on small merchants and the wider e-payments ecosystem.
Additionally, the petition asks for transparency around the UPI & Services Steering Committee’s role, its decision-making process, and legal authority. A potential RBI-led independent review could be requested to ensure fee structures balance stakeholder interests while promoting digital payment growth without unintentionally disadvantaging merchants or users.