Supreme Court Challenges New Merchant Discount Rate on UPI Transactions

The Supreme Court of India is examining a petition against the newly imposed Merchant Discount Rate (MDR) on UPI transactions exceeding Rs 2,000. The court has requested responses from the government and the Reserve Bank of India, while declining to issue an interim stay on the decision. This new policy, effective from October 15, introduces a 0.4% fee on certain transactions, marking a significant change in the UPI payment landscape. Essential sectors will face a flat fee, while person-to-person transfers remain unaffected. Read on to learn more about the implications of this ruling.

By Narendra Chaudhary Sep 28, 2026, 13:22 IST

Supreme Court Reviews Merchant Discount Rate on UPI Payments

New Delhi: On Monday, the Supreme Court requested responses from the government and other parties regarding a petition that contests the implementation of a Merchant Discount Rate (MDR) on certain UPI transactions exceeding Rs 2,000.

A panel consisting of Chief Justice Surya Kant and Justices Joymalya Bagchi and V Mohana agreed to consider the case and instructed the Centre, the Reserve Bank of India, and other involved parties to submit their counter affidavits within four weeks.

The court declined to issue an interim stay on the government's decision to enforce the MDR.

N Venkataraman, the Additional Solicitor General representing the government, informed the court that 96% of users of the payment gateway would be exempt from this charge.

The bench remarked that the matter is more technical than legal in nature.

Following the court's notice, the petitioner's counsel requested a stay until the responses were filed, but the bench denied this request.

The public interest litigation (PIL) was initiated by advocate Anjan Datta.

In a significant policy shift, the government has decided to impose a 0.4% fee on UPI transactions over Rs 2,000 made to merchants starting October 15, while ensuring that everyday person-to-person transactions and smaller payments remain free of charge.

The MDR will be limited to Rs 300 for transactions of Rs 75,000 and above.

Sectors with essential services and low margins, such as railways, telecom, insurance, fuel, and agricultural inputs, will incur a flat MDR of Rs 5 for transactions exceeding Rs 2,000.

Transactions involving mutual funds, securities, and stockbrokers will be subject to a 0.02% MDR, also capped at Rs 300.

Person-to-person (P2P) transfers, which account for 37% of UPI's transaction volume and 70% of its value, will continue to be free of charges, regardless of the amount.