The Supreme Court has refused to stay the new Merchant Discount Rate (MDR) framework for specified Unified Payments Interface (UPI) transactions above Rs 2,000. At the same time, the court has sought responses from the Centre, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) on a plea challenging the new system.
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The hearing has brought a key question into focus: if the government is not collecting the UPI charge, what is the legal basis for imposing it?
Supreme Court Questions Nature of UPI MDR Charge
A three-judge bench headed by Chief Justice of India Surya Kant, along with Justices Joymalya Bagchi and V Mohana, heard the plea filed by advocate Anjan Datta. During the hearing, the bench sought clarification on the nature of the Merchant Discount Rate and how the charge is structured.
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Additional Solicitor General N Venkataraman, appearing for the Centre, told the court that the MDR is neither a tax nor a fee collected by the government. According to the Centre’s position, the money would instead remain within the payment ecosystem. It would be shared among entities involved in processing UPI transactions, including banks, payment service providers and other participants.
Centre, RBI and NPCI Given Four Weeks to Respond
The Supreme Court has now asked the Centre, RBI and NPCI to file their responses to the plea challenging the new MDR framework. The three authorities have been given four weeks to respond.
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The court’s decision not to stay the framework means the new MDR system for the specified UPI transactions above Rs 2,000 remains in place for now. The responses sought from the Centre, RBI and NPCI could provide further clarity on the legal and operational basis of the charge.
For India’s largest digital payment system, the case puts the structure of UPI charges under closer legal scrutiny, particularly over who collects the money, where it goes and the basis on which the charge is imposed.
Indrani Priyadarshini is a journalist and editorial professional specialising in technology, artificial intelligence, smart cities, green energy, and digital transformation. With over four years of experience in tech journalism and digital media, she is known for turning complex industry developments into clear, engaging, and insightful stories. Her expertise spans reporting, editorial strategy, digital publishing workflows, and in-depth coverage of emerging technologies shaping the future.
