PIL in Supreme Court challenges new UPI MDR framework

A Public Interest Litigation has been filed in the Supreme Court challenging the Centre’s new Merchant Discount Rate (MDR) framework for specified Unified Payments Interface (UPI) transactions above Rs 2,000.

The petitioner is seeking a stay on its implementation from October 15.

The petition, filed by advocate Anjan Datta, names the Union government, Reserve Bank of India (RBI), National Payments Corporation of India (NPCI), and the UPI and Services Steering Committee as respondents.

The PIL seeks to quash the September 14 notification and September 15 framework governing MDR on specified UPI merchant transactions. It also seeks a stay on the rollout pending adjudication by the Supreme Court.

The petitioner has challenged the basis for imposing MDR on UPI transactions above Rs 2,000, alleging that the framework is against consumer interests and places an unreasonable burden on merchants. The plea further alleges that despite safeguards against passing MDR on to customers, the additional cost could ultimately be reflected in higher prices or other charges.

The petition questions the distinction between UPI and RuPay transactions, alleging that UPI transactions above Rs 2,000 have been excluded from zero-MDR protection while RuPay debit card transactions continue to receive such protection without a similar value-based cap. It also challenges the rationale for fixing Rs 2,000 as the threshold.

The petitioner has sought disclosure of cost studies, underlying data and committee records used to frame the policy, alleging a lack of transparency and public consultation.

Under the new framework, MDR will apply from October 15 to specified person-to-merchant UPI transactions above Rs 2,000, with different rates and caps based on transaction category and value. Person-to-person payments remain outside the regime.

The government has said the charges are intended to create a sustainable revenue model for the UPI ecosystem. It has also cited safeguards to prevent the cost from being passed on to customers, along with a fund for small merchants and an allocation from MDR collections to strengthen the UPI ecosystem.