PIL In Supreme Court Challenges MDR On UPI Transactions Above ₹2,000

A Public Interest Litigation (PIL) has been filed in the Supreme Court challenging the Centre’s recently announced framework allowing Merchant Discount Rate (MDR) on specified person-to-merchant (P2M) UPI transactions above ₹2,000, alleging that the move creates an arbitrary and nationwide financial burden without adequate statutory safeguards.

The petition, filed by advocate Anjan Datta through advocate Ashutosh Dubey, challenges the Gazette notification issued on September 14, 2026, under Section 10A of the Payment and Settlement Systems Act, 2007, as well as the framework announced on September 15 for imposing MDR on specified high-value UPI transactions.

Under the framework, a 0.4 per cent MDR would apply to eligible P2M UPI transactions above ₹2,000, subject to a maximum charge of ₹300 for transactions of ₹75,000 and above. Different rates have been prescribed for certain sectors. The framework is scheduled to come into effect from October 15.

PIL Questions Basis For ₹2,000 Threshold

The petitioner has challenged the manner in which the new charges and categories have been determined, arguing that the government has not publicly disclosed the data or principles behind the ₹2,000 transaction threshold, ₹1 lakh monthly-receipt classification, differential sector rates and ₹75,000 cap.

The plea also questions the difference between transactions just above and below the threshold.

According to the petition, a transaction of ₹2,001 would attract a percentage-based charge while a ₹2,000 transaction would not, creating what it describes as a "cliff" that could influence transaction behaviour and result in unequal treatment of similarly placed merchants.

The petitioner has also questioned the process through which the detailed MDR framework was introduced, arguing that essential rate-setting and classification decisions cannot be delegated without clear legislative standards, publication and regulatory oversight.

Seeks Records Behind MDR Decision

The PIL has sought the complete record relating to the decision, including the statutory basis for the framework, the constitution and authority of the UPI and Services Steering Committee, its decisions and minutes, and the legal basis for prescribing MDR rates and distributing the charges among private participants in the UPI ecosystem.

The petitioner has sought quashing or suspension of the framework to the extent that it imposes MDR on UPI transactions above ₹2,000.

Alternatively, the plea seeks reconsideration of the framework after transparent consultation, publication of supporting empirical data and an impact assessment, along with safeguards for micro and small enterprises.

Centre Says UPI Will Remain Free For Consumers

The PIL comes amid the Centre's explanation that the revised framework is intended to make the UPI ecosystem financially sustainable.

The Union Finance Ministry said UPI processed 24.5 billion transactions in August 2026 and argued that a small fee on high-value merchant transactions would help fund payment infrastructure, cybersecurity and support for small merchants in Tier III-VI towns and rural areas.

The government has maintained that consumers will not be charged for UPI payments and that person-to-person transactions will remain free irrespective of the amount. It has also said merchants receiving up to ₹1 lakh a month through UPI QR codes will continue to have zero charges, while more than 95 per cent of merchant payments below ₹2,000 will remain free.

The Reserve Bank of India has separately described MDR on large-value UPI transactions as a step towards strengthening the long-term sustainability of the digital payments ecosystem, while reiterating that UPI transactions will remain free for users.

The petitioner, who filed the plea under Article 32 of the Constitution, said he had approached the Supreme Court in public interest because of the widespread use of UPI among consumers and small merchants across the country.