The Supreme Court on declined to grant a stay on the new Merchant Discount Rate (MDR) framework for specified UPI transactions above Rs 2,000. However, a three-judge bench led by Chief Justice of India Surya Kant issued notices seeking responses within four weeks from the Centre, the Reserve Bank of India (RBI), and the National Payments Corporation of India (NPCI) regarding a plea challenging the legality of the charge.

During proceedings on the petition filed by advocate Anjan Datta, Additional Solicitor General N. Venkataraman, appearing for the Centre, clarified that the MDR is neither a tax nor a fee collected by the government. Instead, it is a commercial charge distributed among banks, payment service providers, and other intermediaries to sustain payment ecosystem infrastructure.

Key Details of the New MDR Framework

• Individual-to-Individual (P2P) Transactions: Remain completely free for all amounts.
• Small & Routine Purchases: Merchant payments (P2M) up to Rs 2,000 remain exempt from MDR.
• Standard MDR Rate: A 0.4% charge applies to eligible merchant transactions above Rs 2,000, capped at Rs 300 for payments of Rs 75,000 or higher.
• Small Merchant Exemption: Small merchants receiving up to Rs 1 lakh per month via specified UPI QR codes will continue to enjoy zero MDR. The government estimates that nearly 96% of total UPI merchant transactions will remain unaffected.
• Sector-Specific Flat Fees: Transactions above Rs 2,000 in key sectors—including railways, telecom, fuel, insurance, and agricultural inputs—will attract a flat MDR of Rs 5.
• Capital Markets: Investments in mutual funds, securities

Because jewellery, gold, and high-end electronics fall under standard commercial retail, transactions above Rs 2,000 are subject to the standard 0.4% MDR, subject to the maximum cap of Rs 300.  Jewellers and high-value retailers are legally prohibited from passing this fee directly to the buyer as a surcharge or adding separate payment convenience charges.