Supreme Court plea challenges proposed MDR on UPI payments above ₹2,000

A PIL has challenged the Centre’s proposed merchant discount rate regime for UPI transactions above ₹2,000. The framework, due to take effect on October 15, 2026, proposes a 0.4% MDR, with exemptions for smaller payments and eligible small merchants.

— Source publishedWed, 16 Sept, 2026, 21:11 IST·First seen Wed, 16 Sept, 2026, 21:22 IST·Source YourStory · Capital

What happened

A PIL in the Supreme Court challenges the Centre’s proposed MDR on merchant UPI payments above Rs 2,000, arguing inadequate safeguards and consultation. The

Key facts

  • 0.4% MDR
  • Rs 2,000 transaction threshold
  • Rs 300 cap for transactions of Rs 75,000 and above
  • Rs 5 flat MDR for specified sectors
  • 0.02% MDR for capital-market transactions
  • Rs 1 lakh monthly exemption threshold for small merchants

Why this matters

Payments, merchant-acquiring, and checkout-platform targets with enterprise UPI capabilities may gain strategic value if MDR is implemented, while retail acquirers should diligence exposure to higher transaction costs and exemption eligibility.

What to watch

  • Supreme Court admission, notice to the Centre, interim stay, or hearing dates in the PIL.
  • Final government notification detailing merchant eligibility, transaction aggregation rules, MDR payer, GST treatment, and enforcement mechanics.
  • NPCI, RBI, Finance Ministry, and bank guidance on implementation and settlement flows.
  • Merchant association responses and evidence of surcharge, minimum-ticket, or payment-steering experiments.
  • UPI transaction mix changes around the ₹2,000 threshold, including potential ticket-splitting or migration to alternative rails.
  • PSP and acquirer announcements of revised merchant pricing or subsidies ahead of October 15, 2026.
  • Model UPI acceptance costs by average ticket size, merchant category, and share of transactions above ₹2,000; identify retailers with the greatest exposure.
  • Prepare checkout steering and tender-routing tests, including incentives for lower-cost payment modes without degrading UPI conversion.
  • Renegotiate PSP, acquirer, and payment-gateway contracts for MDR pass-through caps, blended pricing, and volume-linked rebates.
  • Review pricing, loyalty, and promotional policies for potential restrictions on payment-method surcharges or customer steering.
  • Track whether large marketplaces, fuel retailers, electronics chains, travel merchants, and department stores coordinate lobbying for threshold or rate changes.

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