New Delhi: The Supreme Court on Monday has sought responses from the Centre, the Reserve Bank of India (RBI), the National Payments Corporation of India (NPCI) and other authorities on a PIL challenging the proposed Merchant Discount Rate (MDR) on UPI payments above Rs 2,000.
However, the Court refused to stay the new MDR framework.
This clears the way for the proposed system to come into effect from October 15.
A bench headed by Chief Justice of India Surya Kant, along with Justice Joymalya Bagchi and Justice V. Mohana, was hearing a PIL filed by lawyer Anjan Datta.
During the hearing, the Court questioned the basis and nature of the proposed charge. The bench asked who would earn from the MDR and whether the charge was a fee or a form of tax.
The Centre has been asked to file an affidavit explaining the basis of the decision within four weeks.
Under the proposed system, UPI payments of up to Rs 2,000 will remain free.
For transactions above Rs 2,000 between individuals and merchants, a 0.4 per cent MDR will be applicable.
The proposed charge will be paid by merchants.
For transactions of Rs 75,000 or more, the MDR will be capped at Rs 300.
Payments involving essential services such as railways, telecom, insurance, fuel and agricultural products will attract a fixed MDR of Rs 5 for transactions above Rs 2,000.
Payments linked to stock markets, securities and mutual funds will attract an MDR of 0.02 per cent, subject to a maximum of Rs 300.
The Centre told the Supreme Court that the rollout is scheduled for October 15 and that around 96 per cent of transactions will remain exempt.
Person-to-person UPI transactions will also not attract the charge.
The PIL challenges the legal basis of the new MDR framework and raises concerns over transparency, public consultation and the possible impact on consumers.
It also challenges the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007.
The petitioner has argued that although the charge will be imposed on merchants, its cost could eventually be passed on to customers. The plea has also questioned the different treatment of UPI and RuPay debit card transactions.
