Supreme Court to hear challenge to proposed MDR on UPI merchant payments above Rs 2,000
The petition contests a proposed 0.4% MDR on specified UPI P2M transactions above Rs 2,000, capped at Rs 300. If implemented from October 15, the framework could add payment-acceptance costs for retailers, with separate rates for essential sectors and financial-market transactions.
What happened
The Supreme Court will hear a petition challenging the proposed MDR on UPI merchant payments above Rs 2,000. The 0.4% fee, capped at Rs 300, could raise
Key facts
- 0.4% MDR on specified UPI P2M transactions above Rs 2,000
- Rs 300 maximum charge for transactions of Rs 75,000 and above
- Rs 5 flat MDR for specified essential and low-margin sectors above Rs 2,000
- 0.02% MDR for mutual fund, securities, stockbroker and dealer transactions, capped at Rs 300
- P2P payments account for about 37% of UPI volume and nearly 70% of value
Why this matters
The potential repricing of UPI acceptance may increase the strategic value of partnerships or acquisitions in payment orchestration, merchant acquiring, and lower-cost alternative payment channels.
What to watch
- Supreme Court interim order, hearing schedule, and any stay on the proposed October 15 implementation.
- Final government, NPCI, RBI, or payment-network notification defining covered transactions, merchant categories, exemptions, and fee collection.
- Clarification of whether MDR may be surcharged to customers or must be absorbed by merchants.
- PSP/acquirer notices revising merchant pricing, settlement deductions, or merchant-category-code treatment.
- Evidence of retailer payment steering, changes in UPI acceptance terms, or reduced incentives for high-value UPI transactions.
- Map UPI P2M sales above Rs 2,000 by store format, category, merchant code, and payment-service provider to quantify gross MDR exposure.
- Review acquiring and PSP contracts for pass-through clauses, settlement timing, surcharge restrictions, and the ability to route transactions across UPI, cards, and other rails.
- Model margin impact under full absorption, partial price pass-through, and threshold-based basket management; include the Rs 300 transaction cap.
- Prepare customer and cashier communications only if permitted pricing differentiation or payment steering becomes operationally necessary.
- Engage industry associations and payment partners on sector classification, essential-goods eligibility, and implementation mechanics.