Supreme Court refuses to stay fee on UPI transactions above Rs 2,000

The Supreme Court ruled against staying the government's decision to implement an MDR fee on specific UPI person-to-merchant transactions exceeding Rs 2,000. The court was dealing with a challenge to the new UPI fee structure. The MDR regime for UPI transactions was introduced on September 15. Merchants will pay a 0.4% fee, known as MDR, on transactions above Rs 2,000, with a few exceptions.

This fee is intended to be levied within the merchant payment system, not directly on customers making UPI payments. The government has advised banks to prevent merchants from passing the MDR cost onto customers. Payment app providers are expressly barred from adding platform fees or hidden charges. The new MDR framework is projected to generate approximately Rs 15,000 crore, which will be distributed among banks, payment apps, and payment service providers.

This decision marks the initial step in introducing a levy within India's payment ecosystem for UPI transactions, which have become nearly cash-equivalent in their extensive use over the past six years.