A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana is scheduled to take up the public interest litigation filed by advocate Anjan Datta. The petition challenges the Centre’s September 14 notification and the MDR framework announced the following day, which is due to operate from October 15.
Under the framework, a 0.4 per cent MDR will apply to general person-to-merchant, or P2M, UPI transactions above ₹2,000. The charge will be borne within the merchant-payment ecosystem and capped at ₹300 for transactions of ₹75,000 and above. Person-to-person transfers will continue without MDR, while merchant payments up to ₹2,000 will also remain outside the charge.
The petition seeks to have the notification and framework quashed or suspended, arguing that the levy was introduced without adequate statutory safeguards, transparency or public consultation. It also questions the legal basis for withdrawing the zero-MDR protection that had applied to UPI merchant payments since 2020.
Datta has made the Union finance ministry, the Reserve Bank of India and the National Payments Corporation of India parties to the proceedings. His plea contends that although the MDR is formally imposed on merchants, businesses could seek to recover the additional expense through prices or other charges, potentially shifting the economic burden to consumers.
The petition also challenges the differential treatment of UPI and RuPay debit-card transactions. The September 14 notification, issued under Section 10A of the Payment and Settlement Systems Act, 2007, retains no-charge protection for RuPay debit-card transactions irrespective of value while limiting the statutory protection for UPI merchant payments to transactions of up to ₹2,000.
According to the plea, the ₹2,000 transaction threshold and the ₹1 lakh monthly UPI-receipt ceiling used to identify exempt small merchants have not been supported by disclosed data or cost studies. It argues that the classifications require a clear and rational basis because they affect merchants operating across different sectors and scales.
The government’s framework exempts small merchants receiving up to ₹1 lakh a month through UPI QR-code payments. It also provides different rates for selected categories. Essential and thin-margin sectors including railways, telecom services, insurance, fuel and agricultural inputs will face a flat MDR of ₹5 for each eligible transaction above ₹2,000.
Payments involving mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02 per cent, capped at ₹300. The general 0.4 per cent rate applies to other specified P2M payments above the threshold.
The Centre has maintained that customers will not be charged for making UPI payments and that payment providers and banks cannot impose platform fees or hidden charges on users. Government figures accompanying the framework indicate that about 96 per cent of merchant UPI transactions by volume will remain unaffected because they fall outside the charge or within exemptions.
The policy marks a significant change to the economics of UPI, which has operated under a statutory zero-MDR regime for merchant transactions for nearly six years. The government has presented the revised structure as a means of supporting the costs of payment infrastructure, cybersecurity, customer service and continued expansion of the network.
UPI has become the country’s dominant retail digital-payment channel. The system processed about 24 billion transactions worth roughly $311 billion in August, highlighting the scale of the merchant ecosystem potentially affected by changes to its pricing structure.
The challenge does not oppose expenditure needed to maintain secure digital-payment infrastructure. Instead, the petition argues that any nationwide payment burden should rest on a transparent legal and evidentiary foundation, with safeguards against merchants passing costs to customers.
