A three-judge bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V. Mohana refused interim relief while hearing a public interest litigation filed by advocate Anjan Datta. The court issued notices to the Union Government, the Reserve Bank of India and the National Payments Corporation of India, seeking their responses to the challenge.
During the hearing, the bench observed that the central grievance over the proposed charging structure appeared “less legal and more technical”, indicating that it was not persuaded to suspend the framework before examining the issues in greater detail.
The petition challenges the government’s September 14 notification and the MDR framework announced the following day. It seeks to quash or suspend the scheme insofar as it permits charges on specified person-to-merchant, or P2M, UPI payments exceeding ₹2,000.
Under the framework, general P2M transactions above ₹2,000 will attract an MDR of 0.4 per cent, with the charge capped at ₹300 for payments of ₹75,000 and above. Payments of ₹2,000 or less will remain free, as will person-to-person transfers regardless of value.
The charge is imposed within the merchant-payment ecosystem rather than on the customer. The government and NPCI have said consumers will not be charged for making ordinary UPI payments. Eligible small merchants receiving up to ₹1 lakh a month through UPI QR payments are also exempt under the framework.
Different rates have been prescribed for certain sectors. Transactions above ₹2,000 in railways, telecommunications, insurance, fuel and agricultural inputs will attract a flat ₹5 MDR. Payments involving mutual funds, securities, stockbrokers and dealers will carry a 0.02 per cent MDR, capped at ₹300.
Datta’s petition argues that the framework was introduced without adequate statutory safeguards, transparency or public consultation. It also challenges the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007, alleging that the provision gives the executive insufficiently guided power to determine which electronic payment methods receive protection from charges.
The plea also questions the distinction between UPI and RuPay debit-card transactions, pointing to continued no-charge protection for RuPay debit cards without a comparable monetary ceiling. It contends that the ₹2,000 transaction threshold and the ₹1 lakh monthly-receipts threshold for exempt small merchants lack a disclosed empirical basis.
The petitioner has asked the court, alternatively, to direct a fresh review after consultation and publication of the data and impact assessment underlying the classifications. The plea also seeks safeguards for micro and small businesses and argues that any future classification should take account of factors including merchant turnover, margins, geography and capacity to bear payment costs.
The government has defended the MDR framework as a way of creating a sustainable funding model for the UPI ecosystem while shielding customers and smaller merchants. The proceeds are intended to support payment infrastructure, cybersecurity, innovation and customer service across banks, payment applications and other participants.
NPCI has said UPI would remain a comparatively low-cost payment channel after the change. The new structure marks a shift from the zero-MDR regime that has applied to standard bank-account UPI merchant payments for nearly six years.
The policy has nevertheless prompted concern among sections of the retail and merchant community that businesses operating on narrow margins could face higher acceptance costs. The framework bars banks and UPI providers from directly passing the MDR to customers, while the petition argues that merchants could still seek to recover costs indirectly through pricing.
UPI has become the dominant retail digital-payment channel by transaction volume. The system processed about 24 billion transactions worth roughly $311 billion in August, underlining the scale of the payment network affected by any change in its commercial model.
The Supreme Court’s refusal to grant interim protection means implementation preparations can continue while the constitutional and statutory challenge remains pending. Responses from the government, RBI and NPCI will place their legal and policy justification for the framework before the court.
