On what legal basis, who earns? SC asks government to explain UPI MDR charge

The Supreme Court on Monday sought clarity from the Centre, RBI and NPCI on the legal basis for imposing a Merchant Discount Rate (MDR) on certain UPI transactions. The court also asked who would earn from the charges and how the money would be distributed.

The matter came up during a plea challenging the Centre's decision to impose MDR on specified UPI person-to-merchant transactions above Rs 2,000. The petitioner sought a stay on the implementation of the charges, but the Supreme Court declined to grant an immediate stay.advertisement❮❯ Read Full StorySC ASKS GOVERNMENT TO EXPLAIN LEGAL BASISThe court asked the authorities to explain the legal basis for charging MDR on UPI transactions. It also sought clarity on the role of the RBI and NPCI under the new framework.

The court said it would consider the issue after the concerned authorities file their affidavits. It has not taken a final view on the legality of the charges at this stage.

The government has ended nearly six years of fully free UPI payments by introducing a 0.4 per cent fee on specified merchant payments above Rs 2,000 from October 15. Person-to-person transfers and smaller payments will remain outside the charge.

The MDR will be capped at Rs 300 for payments of Rs 75,000 and above. Essential and thin-margin sectors, including railways, telecom, insurance, fuel and agricultural inputs, will pay a flat MDR of Rs 5 per transaction for payments above Rs 2,000.

The public interest litigation, filed by advocate Anjan Datta, challenges the Centre's September 14 notification and the MDR framework announced on September 15.

The plea alleges that the levy was introduced without adequate statutory safeguards, transparency or public consultation. It seeks the quashing or suspension of the framework for UPI transactions above Rs 2,000.

Alternatively, it has sought a fresh review after transparent consultation, publication of empirical data and an impact assessment, along with safeguards for micro and small enterprises.- Ends