The Supreme Court has refused to stay the implementation of the Centre’s decision to levy a 0.4% Merchant Discount Rate (MDR) on certain UPI merchant transactions above ₹2,000. The court has issued notices to the Centre, the Reserve Bank of India (RBI), the National Payments Corporation of India (NPCI) and the UPI Steering Committee, seeking responses within four weeks.
The matter concerns the Centre’s decision to introduce a 0.4% MDR on certain Person-to-Merchant (P2M) UPI payments exceeding ₹2,000. The new framework is stated to take effect from October 15, 2026, while the applicable UPI payments up to ₹2,000 will remain outside the MDR arrangement.
The development comes as UPI has become the most widely used digital payment mode in India. According to NPCI data, UPI recorded around 24.51 billion transactions in August 2026, with a total value of approximately ₹29.82 lakh crore.
A petition challenging the new arrangement has been filed by advocate Anjan Dutta. The petition questions the validity of the Centre’s notification issued in September and the MDR framework that followed. The petitioner has argued that there is no sufficient legal basis for imposing such a charge.
The Supreme Court has not imposed an interim stay on the arrangement. The court has sought responses from the concerned parties within four weeks.
Under the Centre’s new framework, a 0.4% MDR is to apply to certain P2M UPI payments above ₹2,000. The arrangement does not state that every UPI customer will be separately charged for making such payments.
MDR is primarily a charge within the merchant-linked payment infrastructure and is associated with the services provided by banks, payment service providers and other relevant participants in the payment ecosystem.
Merchant Discount Rate, or MDR, is a fee charged within the merchant-linked payment ecosystem for accepting digital payments. Various parties involved in processing payments can form part of this ecosystem, including banks, payment networks and payment service providers.
Therefore, UPI MDR is not the same as a general payment fee collected directly from customers. A key legal issue in the current dispute is the nature of the proposed MDR and the statutory basis for its implementation.
Under the new arrangement, a 0.4% MDR is to apply to eligible merchant UPI payments above ₹2,000. According to available reports, the framework is not intended to impose a separate charge directly on customers.
Person-to-Person (P2P) UPI payments are not covered by the arrangement. Its actual impact could extend to merchants’ payment costs and the cost structure of the digital payment ecosystem. The impact on small and large merchants will depend on the size of their transactions and the payment methods they use.
