Plea in Supreme Court challenges UPI fee on transactions above Rs 2,000

The plea challenges the September 14 notification issued under Section 10A of the Payment and Settlement Systems (PSS) Act, 2007. (AI generated image)

A Public Interest Litigation was filed in the Supreme Court Wednesday challenging the Centre’s decision to allow Merchant Discount Rate (MDR) on certain UPI transactions, a day after the Ministry of Finance announced the applicable fee structure. The court has yet to take up the plea.

The plea challenges the September 14 notification issued under Section 10A of the Payment and Settlement Systems (PSS) Act, 2007, which specified only two payment modes as entitled to statutory “no-charge protection”: RuPay-powered debit cards, without any monetary ceiling, and UPI transactions up to Rs. 2,000.

The petition argues that the move effectively withdrew zero-MDR protection for UPI transactions above Rs 2,000, which had been in place since January 2020.

The Finance Ministry announced the fee structure through a press release. Under the framework, Person-to-Merchant UPI transactions above Rs 2,000 would attract an MDR of 0.4 per cent and be capped at Rs 300 for transactions of Rs 75,000 and above.

Certain “essential and thin-margin” sectors would pay a Rs 5 charge, while capital-market transactions would attract MDR at 0.02 per cent. This framework is scheduled to take effect from October 15.

The challenge comes against the backdrop of Reserve Bank of India (RBI)’s role as the country’s payments regulator. Under the PSS Act, the central bank regulates and supervises payment systems, while NPCI, which operates UPI, functions under RBI authorisation and oversight.

A day after the framework was announced, RBI backed it in a post on X. The introduction of MDR on transactions above Rs 2,000, it said, is “an important step towards strengthening the long-term sustainability of India’s digital payments ecosystem,” and will help UPI “continue to scale, innovate and serve consumers and businesses across the country.”

Story continues below this ad

RBI said a “fair and appropriate distribution of MDR across ecosystem participants” would support investment in payment infrastructure.