A Public Interest Litigation (PIL) has been filed before the Supreme Court of India challenging the recently announced framework introducing Merchant Discount Rate (MDR) charges on certain Unified Payments Interface (UPI) merchant transactions.
The petition questions the legality and validity of the decision to levy a 0.4% MDR on merchant payments exceeding ₹2,000, scheduled to come into effect from October 15, 2026. The petitioner has reportedly sought judicial intervention to suspend and quash the new fee structure, arguing that it may adversely impact India's digital payments ecosystem.
According to reports, the challenge contends that the fee framework was introduced without adequate statutory safeguards and transparency. The petitioner has further argued that the move may discourage merchants from accepting digital payments and could eventually affect consumers if businesses pass on the additional costs.
The issue has emerged amid broader concerns from trade bodies, retailers, and market participants regarding the sustainability and impact of MDR charges on businesses operating with narrow profit margins. Several industry stakeholders have expressed apprehension that the charges could lead to a renewed preference for cash transactions.
The government and payment ecosystem participants, however, have defended the move as a mechanism to support digital payment infrastructure and ensure long-term sustainability of the UPI ecosystem. The framework reportedly applies only to specified merchant transactions and does not impose charges on person-to-person transfers.
The Supreme Court's consideration of the PIL is expected to have significant implications for India's digital payments regime, balancing the objectives of financial inclusion, digital adoption, and infrastructure sustainability.