Supreme Court issues notice on UPI merchant charge above ₹2,000, declines to stay it
On 28 September 2026 the Supreme Court asked the Centre, RBI and NPCI to respond within four weeks to a petition against the 0.4% UPI merchant discount rate on payments above ₹2,000, and did not stay it. The charge is due from 15 October.
The Supreme Court on 28 September 2026 asked the Union government, the Reserve Bank of India (RBI) and other respondents to file their responses within four weeks to a petition challenging the merchant discount rate (MDR) on certain UPI payments above ₹2,000. The court did not stay the charge, which is due to start on 15 October 2026.
What happened in court
According to press reports, a bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and V. Mohana heard a public interest petition filed by advocate Anjan Datta under Article 32 of the Constitution. The bench issued notice and asked for counter affidavits within four weeks. It declined the petitioner’s request to stay the charge until responses were filed.
Reports say Justice Bagchi asked whether the charge is a tax or a fee and, if it is neither, what its legal basis is. The Additional Solicitor General appearing for the Centre was reported to have said it is neither a tax nor a fee. The court will examine the matter after the responses are filed. No next hearing date is given in the reports reviewed.
What the petition challenges
According to LiveLaw’s report of the filing, the petition (Anjan Datta vs Union of India) challenges the Finance Ministry’s notification of 14 September 2026 and the MDR framework announced on 15 September. It names the Union government, the RBI, the National Payments Corporation of India (NPCI) and the UPI and Services Steering Committee as respondents. The reported grounds include:
- that the distinction between UPI payments (protected from charges up to ₹2,000) and RuPay debit cards (protected without a limit) has no rational basis under Article 14;
- that the 14 September notification does not itself set an MDR rate, formula or ceiling;
- that the rates were set out in a Finance Ministry press release of 15 September, and the petitioner is not aware of any gazette notification prescribing them;
- that an NPCI-led committee has been given power to set rates without clear legislative standards.
The petition asks for the notification and framework to be quashed and for amended Section 10A of the Payment and Settlement Systems Act, 2007 to be declared unconstitutional, or alternatively for a fresh review after consultation.
The charge itself
| Item | Detail |
|---|---|
| Issued by | NPCI, circular NPCI/UPI/OC-No.237/2026-27 dated 15 September 2026 |
| Applies to | UPI person-to-merchant (P2M) transactions above ₹2,000 |
| Rate | Merchant discount rate of up to 0.4% |
| Effective from | 15 October 2026 |
| Charged to customers | No. Paytm’s filing, citing the circular, says UPI payments remain free of charge for customers |
According to press reports of the framework (Business Standard, ThePrint, LiveLaw, Moneylife, SCC Online), the rate is capped at ₹300 per transaction for payments of ₹75,000 and above, a flat ₹5 per transaction applies above ₹2,000 for railways, telecom, insurance, fuel and agricultural inputs, and a 0.02% rate, also capped at ₹300, applies to capital-market payments. The same reports say person-to-person transfers and small merchants receiving up to ₹1 lakh a month through UPI QR codes are exempt.
Background
The Finance Ministry’s notification of 14 September 2026 (S.O. 5067(E), as reported) lists UPI payments up to ₹2,000 and RuPay debit card payments as electronic payment modes on which banks and system providers may not levy a charge. Parliament amended Section 10A of the Payment and Settlement Systems Act, 2007 in August 2026, according to press reports.
Basis of these figures
Court proceedings are as reported by Business Standard, United News of India and The Week. The petition’s grounds are from LiveLaw. The circular number, date, effective date and scope are from Paytm’s stock exchange filing of 15 September 2026, which refers to the circular. The cap and category rates are from SCC Online’s summary of NPCI’s FAQs. WealthStar has not opened the court order or the NPCI circular itself.