The Supreme Court has moved against a proposed 0.4% merchant fee on high-value UPI transactions, sparking a legal debate over the move’s impact on small businesses and the drive for a less-cash economy.
The Supreme Court has been moved against a new 0.4% merchant fee on certain UPI payments above Rs 2,000, with the challenge opening a fresh legal front in India’s debate over how to fund the fast-growing digital payments network. According to ABP Live, the public interest litigation argues that the move breaches equality rights, harms the right to trade and was introduced without proper consultation.
The National Payments Corporation of India has said the merchant discount rate, or MDR, will apply from October 15, 2026 to specified person-to-merchant UPI transactions above Rs 2,000, while transfers between individuals will remain free. Business Standard reported that the charge will be capped at Rs 300 for transactions of Rs 75,000 or more, and that UPI app providers are barred from adding platform fees to customers.
The government has defended the change as necessary for the sustainability of digital payments infrastructure, after rejecting claims that outside pressure shaped the policy. Livemint reported that credit card-linked UPI payments are exempt from the new fee and will continue to fall under existing card regulations. Hindustan Times also reported that small merchants receiving up to Rs 1 lakh a month through UPI QR codes are exempt, even as the broader framework is meant to help pay for payments infrastructure and cyber security upgrades.
The petition says the new levy could add pressure on small businesses and encourage cash payments instead, which would run against the aim of a less-cash economy. Opposition parties have also criticised the move, calling it a burden on merchants, although the government has maintained that the charge is limited, targeted and tied to long-term system costs.
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