The Supreme Court is set to hear a legal challenge against the government's plan to introduce a 0.4% fee on UPI transactions over ₹2,000 starting October 15. The case questions the legal process behind the new charge and its potential impact on small merchants, who have operated under a zero-fee structure for years.
On Monday, the Supreme Court is scheduled to hear a petition challenging the government's recent decision to impose a 0.4% Merchant Discount Rate (MDR) on UPI transactions exceeding ₹2,000. This policy is currently set to take effect on October 15. The matter will be heard by a bench led by Chief Justice of India Surya Kant, with the central government and the Reserve Bank of India listed as the primary respondents.
The core of the legal challenge, filed by advocate Anjan Datta, focuses on the transparency and statutory basis of the new fee. The petition argues that the amendment to Section 10A of the Payment and Settlement Systems Act, 2007, gives the government too much power to set charges without proper parliamentary oversight. The petitioner claims that imposing financial levies through press releases and FAQ documents, rather than through formal, published statutory instruments, creates uncertainty for the market and lacks sufficient legal accountability.
For years, UPI has operated under a zero-fee model for both users and merchants, which has been a primary driver for the rapid adoption of digital payments in India. Small merchants, such as neighborhood kirana stores, often operate on very thin profit margins. The introduction of a 0.4% fee on transactions above ₹2,000 could change the economics for these businesses, potentially increasing their operational costs or forcing them to pass the burden to consumers.
The petition also highlights a potential lack of parity in the current policy. It draws a comparison between the proposed UPI fee structure and RuPay debit card transactions, which continue to operate under a zero-charge protection without any monetary limit. The petitioner argues that this disparity is arbitrary and could discourage small enterprises from continuing to adopt digital payment methods. The plea seeks an immediate suspension of the framework until a detailed impact assessment is conducted and proper stakeholder consultations are completed.
The outcome of the upcoming Supreme Court hearing will be critical for the digital payments ecosystem. Investors and market participants will be monitoring the proceedings to see if the court grants an interim stay on the October 15 rollout. The final decision will influence the cost structures for payment aggregators, banks, and the millions of small merchants who rely on UPI for their daily business transactions.