Quick Summary
India's popular UPI payment system is facing a fresh legal challenge after a Public Interest Litigation (PIL) was filed in the Supreme Court against the proposed merchant charges on certain UPI transactions above Rs 2,000. The issue has sparked debate among merchants, payment industry participants and policymakers, particularly over whether introducing a Merchant Discount Rate (MDR) could increase the cost of accepting digital payments. However, one important clarification is that UPI is not b
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FAQ :
A 0.4% Merchant Discount Rate (MDR) is being introduced for specific person-to-merchant (P2M) UPI transactions above Rs 2,000. For certain essential sectors, a flat Rs 5 MDR will apply.
The new framework is scheduled to take effect from October 15, 2026.
No, person-to-person (P2P) UPI payments will remain free regardless of the amount. Merchant payments up to Rs 2,000 will also continue to have zero MDR.
The government states the charges are for the long-term sustainability of the UPI ecosystem, helping to cover the costs of maintaining the payment infrastructure.
Merchants, especially those with low margins, are concerned about the additional cost of accepting certain UPI payments, which they may have to absorb or pass on to consumers.
The Public Interest Litigation (PIL) challenges the government's decision to introduce the MDR framework, questioning its legal basis, transparency, and the process of introduction.
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