SC to hear PIL against UPI-MDR charges today
What's the story
The Supreme Court of India is set to hear a plea challenging the government's decision to impose a Merchant Discount Rate (MDR) on certain UPI person-to-merchant (P2M) transactions above ₹2,000. The public interest litigation (PIL), filed by advocate Anjan Datta, challenges the Centre's September 14 notification and the MDR framework announced on September 15. The new rules are slated to come into effect from October 15.
Fee structure
Fee capped at ₹300 for high-value transactions
The new MDR framework proposes a 0.4% fee on UPI transactions over ₹2,000 made to merchants. The charge will be capped at ₹300 for transactions of ₹75,000 and above.
However, person-to-person (P2P) UPI transfers will remain free of charge regardless of the transaction value.
Notably, P2P transactions account for 37% of UPI's transaction volume and 70% of its transaction value.
Sector-specific fees
Separate fee structure for specific sectors
The new MDR framework also introduces a separate fee structure for certain sectors.
For payments over ₹2,000 in railways, telecom, insurance, fuel, and agricultural inputs, a flat MDR of ₹5 per transaction will be charged.
For mutual funds, securities, and stockbrokers/dealers transactions, the MDR is set at 0.02%, capped at ₹300.
Legal challenge
PIL challenges introduction of MDR framework
The PIL challenges the way in which the MDR framework was introduced, alleging it lacks statutory safeguards, transparency, and public consultation.
It also questions the constitutional validity of amended Section 10A of the Payment and Settlement Systems Act, 2007.
The provision allegedly gives broad powers to the executive to decide which electronic payment modes will be protected from charges.
Petition demands
Petitioner demands transparent consultation on future MDR classifications
The PIL seeks either the quashing or suspension of the MDR framework as far as it imposes a charge on UPI transactions above ₹2,000.
Alternatively, it has sought a reconsideration after transparent consultation and publication of relevant data.
The petitioner has also asked that any future MDR classification consider factors such as merchant turnover, statutory MSME status, actual margins geography and cost-bearing capacity.