New Delhi, September 16, 2026 (Yes Punjab News)
A Public Interest Litigation has been filed in the Supreme Court challenging the Centre’s recent framework allowing Merchant Discount Rate (MDR) on specified person-to-merchant (P2M) UPI transactions above Rs 2,000, alleging that the move is arbitrary, discriminatory and lacks adequate statutory safeguards.
The plea, filed by advocate Anjan Datta through advocate Ashutosh Dubey, challenges the September 14 Gazette notification issued under the Payment and Settlement Systems Act, 2007, as well as the framework announced on September 15 for imposing MDR on specified high-value UPI merchant transactions.
Under the new framework, an MDR of 0.4 per cent will apply to specified P2M UPI transactions above Rs 2,000, subject to a maximum charge of Rs 300 per transaction. The framework is scheduled to take effect from October 15.
The petitioner has challenged the manner in which the framework was formulated and alleged that the government has created a nationwide financial burden without making public the complete operative instrument, underlying cost study, methodology, safeguards and other relevant records.
“The challenge is not to the legitimate objective of maintaining secure and resilient payment infrastructure. It is to the manner in which a nationwide compulsory payment burden has been created, classified and distributed without publication of the complete operative instrument, statutory source, underlying cost study, minutes, methodology, safeguards or enforceable anti-pass-through mechanism,” the plea stated.
The petition contends that the Rs 2,000 threshold, the Rs 1 lakh monthly-receipt classification for small merchants, differential sector rates and the Rs 75,000 cap lack publicly disclosed empirical data or determining principles.
It also questioned the difference between transactions just above and below the threshold, arguing that a payment of Rs 2,001 would attract MDR while a Rs 2,000 transaction would not, potentially creating what it described as “cliffs” that could influence transaction behaviour and result in unequal treatment among similarly placed merchants.
The plea further challenges the alleged delegation of rate-setting and classification decisions to the UPI and Services Steering Committee, arguing that such decisions require clear legislative standards, publication and regulatory oversight.
“Essential rate-making and classification choices cannot be sub-delegated without clear legislative policy, standards, publication and regulatory supervision,” the petition stated.
The petitioner has sought production of the complete record relating to the decision, including the statutory basis, constitution and authority of the UPI and Services Steering Committee, its decisions and minutes, and the legal basis for prescribing and distributing MDR among participants in the private payment ecosystem.
The PIL seeks quashing or suspension of the framework insofar as it imposes MDR on UPI transactions above Rs 2,000. Alternatively, it has sought reconsideration of the framework following transparent consultation, publication of empirical data and an impact assessment, along with safeguards for micro and small enterprises.
The Centre, however, has maintained that the new framework is intended to ensure the long-term sustainability of the UPI ecosystem. The Finance Ministry has clarified that person-to-person UPI transactions will remain completely free irrespective of transaction value, while payments to merchants up to Rs 2,000 and transactions covered under the zero-MDR framework for small merchants will also remain free. The government said around 96 per cent of P2M transactions will remain unaffected.
According to the government, MDR is not a tax or a charge collected by the government or NPCI, but is distributed among participants in the payment ecosystem, including banks and payment application providers, to support the operation and expansion of UPI.
The Finance Ministry has also said that small merchants receiving up to Rs 1 lakh a month through UPI QR codes will continue to receive the benefit of zero MDR. Certain sectors, including railways, telecom, insurance and fuel, have been assigned separate rates under the framework.
The Reserve Bank of India has separately backed the introduction of MDR on large-value UPI merchant transactions, describing it as a step towards strengthening the long-term sustainability of the digital payments ecosystem while maintaining that UPI remains free for users.
The PIL has been filed under Article 32 of the Constitution. The petitioner has stated that he has no personal interest in the matter and has approached the Supreme Court in public interest, citing the widespread use of UPI by consumers and small merchants across the country.
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