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The Supreme Court has declined to stay the October 15 rollout of the new Merchant Discount Rate (MDR) framework for specified UPI merchant transactions above Rs 2,000. The court has issued notices to the Centre, Reserve Bank of India (RBI) and National Payments Corporation of India (NPCI) on a plea challenging the framework. A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana directed the Centre, RBI and NPCI to file their responses within four weeks. The court also sought an explanation on the basis and legal character of the charge, according to Bar & Bench. The plea, filed by advocate Anjan Datta, challenges the Centre's September 14 notification and the MDR framework announced on September 15. It questions the legal basis for imposing MDR on select UPI transactions and the manner in which the framework was introduced. Under the new framework, a 0.4% MDR will apply to specified person-to-merchant (P2M) UPI transactions above Rs 2,000, capped at Rs 300 for transactions of Rs 75,000 and above. UPI payments to merchants of up to Rs 2,000 and person-to-person (P2P) transactions will continue to remain free. Certain sectors, including railways, telecom, insurance, fuel and agricultural inputs, will attract a flat MDR of Rs 5 on transactions above Rs 2,000. Transactions involving mutual funds, securities, stockbrokers and dealers will carry an MDR of 0.02%, capped at Rs 300. According to the Finance Ministry, the new framework will affect around 4% of merchant UPI transactions, leaving approximately 96% unaffected. The ministry has also clarified that MDR is neither a tax nor a charge collected by the government or NPCI, with the amount distributed among participants in the payments ecosystem. The Finance Ministry has also said banks will ensure that merchants do not pass the MDR on to customers. The framework provides zero-MDR treatment to small merchants receiving up to Rs 1 lakh per month through UPI. The new framework will end the zero-MDR regime for specified UPI merchant transactions that has been in place since 2020. The October 15 implementation remains in place following the Supreme Court's decision not to grant an interim stay.
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