On Monday, the Supreme Court rejected an application for a stay by the Centre on the introduction of a Merchant Discount Ratio (MDR) for UPI person-to-merchant transactions exceeding Rs 2,000.
A bench led by Chief Justice of India Surya Kant, which included Justices Joymalya Bagchi and V Mohana, ordered “the party controller” to submit its counter-affidavit within a time frame of four weeks. The court also sought an explanation from the Centre on the basis for introducing the new fee framework.
Additional Solicitor General N Venkataraman for the Centre has informed the court that the new system would leave about 96 per cent of the merchant transactions unaffected. The bench noted the question was “less a legal and more a technical question,” the authorization of a stay for others was not required and hence they were not authorized to grant such a stay.
The new framework is slated for implementation by October 15, potentially ending almost six years of zero-MDR UPI payments on specified high-value merchant transactions. Applicability of MDR 0.4 per cent and cap of Rs 300 for person-to-person payments exceeding Rs 75,000 at merchants.Eligible person to merchant transactions above Rs 2000 will be liable to MDR, which will be capped at 0.4 per cent and for transactions of Rs 75,000 or above, the cap is at Rs 300.
That charge will not be levied directly on consumers, but rather within the merchant payment system. In addition, transactions with merchants till Rs 2000 will continue to be free and Person to Person (P2P) transfers will also remain fee free independent of transaction value. The government has estimated that around 96 per cent of all the transactions to an Innovator Fund will be unaffected.
However, for some critical thin margin businesses such as railways, telecoms, insurance, fuel, agricultural inputs, the MDR will remain unchanged at Rs 5 per transaction of over Rs 2,000. For payments involving securities, stockbrokers and dealers, mutual funds will have to pay a separate MDR of 0.02 per cent per transaction, with a cap of Rs 300.
The ruling of the Supreme Court makes the planned implementation taking effect on October 15 go ahead for now as the lawsuit continues.