SC to hear plea against MDR on UPI payments tomorrow
What's the story
The Supreme Court of India is set to hear a petition challenging the Indian government's decision to impose Merchant Discount Rate (MDR) on certain UPI transactions, tomorrow. The plea was filed by advocate Anjan Datta and challenges the Centre's September 14 notification and MDR framework announced on September 15. The new rule, which comes into effect from October 15, imposes a fee of 0.4% on person-to-merchant transfers above ₹2,000 made through UPI.
Fee structure
Fee capped at ₹300 for payments of ₹75,000 and above
The newly introduced MDR fee is capped at ₹300 for payments of ₹75,000 and above.
Essential sectors like railways, telecom, insurance, fuel, and agricultural inputs will pay a flat MDR of ₹5 per transaction for transfers above ₹2,000.
Payments into mutual funds/securities through stockbrokers/dealers will attract 0.02% MDR (also capped at ₹300).
However, person-to-person transfers, which account for 37% of UPI's transaction volume and 70% of its value, will remain free regardless of size.
Legal challenge
Petition challenges constitutional validity of amended Section 10A
The petition challenges the constitutional validity of amended Section 10A of the Payment and Settlement Systems Act, 2007.
It alleges that this amendment gives arbitrary powers to the executive to decide which electronic payment modes would be exempt from charges.
The petitioner has also questioned why UPI transactions are treated differently from RuPay debit card payments, as the notification continues no-charge protection for RuPay debit cards without any monetary ceiling.
Petition demands
Petition seeks quashing of MDR framework
The petition seeks either the quashing/suspension of the MDR framework for UPI transactions above ₹2,000 or its reconsideration after transparent consultation and impact assessment.
It also calls for safeguards for micro/small enterprises.
The plea has made the Centre and others including Reserve Bank of India as party respondents in this matter.