PIL in Supreme Court challenges UPI MDR on transactions above ₹2,000
Synopsis
A PIL filed in the Supreme Court on 16 September 2026 has put the Centre's new UPI MDR framework — a 0.4% charge on P2M transactions above ₹2,000, effective 15 October — under judicial scrutiny, alleging it was crafted without disclosed data, statutory clarity, or enforceable consumer protections. With UPI processing 24.5 billion transactions in August 2026 alone, the outcome could reshape India's digital payments architecture.
Key Takeaways
A PIL was filed in the Supreme Court on 16 September 2026 challenging the Centre's UPI MDR framework for transactions above ₹2,000 .
The framework proposes a 0.4% MDR on person-to-merchant UPI transactions, capped at ₹300 for transactions of ₹75,000 and above , effective 15 October 2026 .
The petitioner — advocate Anjan Datta — argues the framework lacks disclosed empirical basis, statutory clarity, and enforceable anti-pass-through safeguards.
The Union Finance Ministry says UPI processed 24.5 billion transactions in August 2026 and the fee will fund infrastructure and rural digital inclusion.
Merchants earning up to ₹1 lakh per month via UPI QR codes and all person-to-person transactions remain exempt from any charge.
The RBI has backed the move as necessary for the long-term sustainability of the digital payments ecosystem.
A Public Interest Litigation (PIL) has been filed in the Supreme Court of India challenging the Centre's newly introduced framework permitting a Merchant Discount Rate (MDR) on high-value Unified Payments Interface (UPI) transactions exceeding ₹2,000, with the petitioner alleging the move is arbitrary, discriminatory, and imposes a nationwide financial burden without adequate statutory safeguards. The plea was filed on 16 September 2026 by advocate Anjan Datta through advocate Ashutosh Dubey.
What the PIL Challenges
The petition challenges two specific instruments: the Gazette Notification published on 14 September 2026 under Section 10A of the Payment and Settlement Systems Act, 2007, and the MDR framework announced on 15 September 2026 for person-to-merchant (P2M) UPI transactions above ₹2,000. The framework proposes a 0.4 per cent MDR on such transactions, capped at ₹300 for transactions of ₹75,000 and above, with separate rates applicable to certain sectors. The framework is proposed to take effect from 15 October 2026.
According to the petition, the challenge is not directed at the objective of maintaining secure payment infrastructure, but at the manner in which the burden has been created. The plea stated: 'The challenge is not to the legitimate objective of maintaining secure and resilient payment infrastructure. It is to the manner in which a nationwide compulsory payment burden has been created, classified and distributed without publication of the complete operative instrument, statutory source, underlying cost study, minutes, methodology, safeguards or enforceable anti-pass-through mechanism.'
Key Legal Objections Raised
The petitioner has argued that critical thresholds embedded in the framework — including the ₹2,000 transaction threshold, the ₹1 lakh monthly-receipt classification, the differential sector rates, and the ₹75,000 cap — lack any disclosed empirical basis or stated determining principles. The plea further contended that a transaction of ₹2,001 would attract a percentage charge while a ₹2,000 transaction would not, describing such 'cliffs' as capable of distorting merchant behaviour and creating unequal treatment among similarly placed businesses.
The petition also questioned the delegation of rate-making authority to what it described as an unincorporated steering committee, arguing that 'essential rate-making and classification choices cannot be sub-delegated without clear legislative policy, standards, publication and regulatory supervision.'
The PIL has sought production of the complete record relating to the decision — including the statutory basis, constitution and authority of the UPI and Services Steering Committee, its decisions and minutes, and the legal basis for distributing MDR among private ecosystem participants. It has also sought quashing or suspension of the framework, or alternatively, reconsideration following transparent consultation, publication of empirical data, an impact assessment, and safeguards for micro and small enterprises.
The Government's Position
This comes amid the Centre's defence that the revised framework is aimed at making the UPI ecosystem financially sustainable. The Union Finance Ministry stated that UPI processed 24.5 billion transactions in August 2026 and that a modest fee on high-value merchant transactions would help fund infrastructure, cybersecurity, and support for small merchants in Tier III–VI towns and rural areas.
The ministry has maintained that UPI remains free for customers, that person-to-person transactions will continue to be free irrespective of amount, and that merchants earning up to ₹1 lakh per month through UPI QR codes will face zero charges. Notably, the government asserts that over 95 per cent of merchant payments below ₹2,000 will remain unaffected.
The Reserve Bank of India (RBI) has separately described the introduction of MDR on large-value UPI transactions as 'an important step towards strengthening the long-term sustainability of the digital payments ecosystem,' while reiterating that all UPI transactions will remain free for end users.
Broader Significance
The petitioner has approached the apex court under Article 32 of the Constitution, asserting no personal interest and citing the widespread use of UPI among consumers and small merchants across the country. UPI has grown into one of the world's largest real-time payments networks, processing billions of transactions monthly, making any structural change to its fee architecture a matter of national economic consequence. The Supreme Court is yet to list the matter for hearing.
Point of View
Without a published cost study or impact assessment. The government's sustainability argument is not without merit — cross-subsidising a 24.5-billion-transaction-a-month network indefinitely is fiscally unsustainable — but the manner of introduction, not the principle, is what courts will scrutinise. The ₹2,000 cliff effect the petitioner flags is a real design flaw: behavioural distortions at threshold points are well-documented in payment systems globally. If the Supreme Court orders disclosure of the underlying data and methodology, it could set a precedent for how India's payments regulator frames future fee decisions — a structural check that has long been missing.
NationPress
16 Sept 2026
Frequently Asked Questions
What is the UPI MDR framework challenged in the Supreme Court PIL?
It is a government framework, notified on 14–15 September 2026, that introduces a 0.4% Merchant Discount Rate on person-to-merchant UPI transactions above ₹2,000, capped at ₹300 for transactions of ₹75,000 and above, with the framework set to take effect from 15 October 2026. A PIL filed by advocate Anjan Datta challenges it as arbitrary and lacking statutory safeguards.
Who filed the PIL and on what grounds?
Advocate Anjan Datta filed the PIL through advocate Ashutosh Dubey under Article 32 of the Constitution, asserting no personal interest. The grounds include absence of a disclosed empirical basis for the thresholds, sub-delegation of rate-making to an unincorporated committee, and lack of enforceable anti-pass-through protections for consumers and small merchants.
Will UPI remain free for ordinary users under the new framework?
Yes, according to the Union Finance Ministry and the RBI. Person-to-person UPI transfers remain free regardless of amount, and merchants earning up to ₹1 lakh per month through UPI QR codes face zero charges. The government says over 95% of merchant payments below ₹2,000 will also remain unaffected.
Why has the government introduced MDR on high-value UPI transactions?
The Union Finance Ministry has stated that UPI processed 24.5 billion transactions in August 2026 and that a modest fee on high-value merchant transactions is needed to fund payment infrastructure, cybersecurity, and support for small merchants in Tier III–VI towns and rural areas. The RBI has called it an important step for the long-term sustainability of the digital payments ecosystem.
What relief has the petitioner sought from the Supreme Court?
The petitioner has sought quashing or suspension of the MDR framework insofar as it applies to UPI transactions above ₹2,000. Alternatively, it has sought reconsideration after transparent public consultation, publication of empirical data and an impact assessment, and enforceable safeguards for micro and small enterprises. The Supreme Court is yet to list the matter for hearing.
