UPI MDR Starts 15 October But Rate Found Only in NPCI Circular, Not Gazette

A 0.4 percent charge on UPI payments above ₹2,000 takes effect on 15 October. The government calls it modest and merchant-only. A petition before the Supreme Court tells a different story—one rooted in the paperwork the state has published and the paperwork it has not.

The rate exists in a National Payments Corporation of India circular and a Ministry of Finance press release. It does not appear in any gazette. That gap is the legal question now before the court.

What MDR Is and Why Zero MDR Existed

A merchant discount rate is the fee a business pays its bank for accepting a digital payment. On credit and debit cards, it can range from roughly 0.9 to 2.5 percent depending on the card type. On UPI, it had been zero since the start of 2020.

Zero was not incidental. It was written into law.

The policy arrived in three stages. In the July 2019 Union Budget, Finance Minister Nirmala Sitharaman announced that businesses with turnover above ₹50 crore must provide digital payment options, with no MDR absorbed by the merchant or passed to the customer. On 1 January 2020, that commitment hardened into Section 10A of the Payment and Settlement Systems Act, 2007, which compelled banks and payment processors to waive fees on UPI and RuPay debit card transactions.

The arrangement held for nearly six years.

The New Arrangement

The September 2026 amendment from the Ministry of Finance partially unwinds that framework. The zero MDR rule survives in limited form: person-to-person transfers remain free, payments under ₹2,000 remain free, and small merchants receiving up to ₹1 lakh monthly remain exempt.

What changes is person-to-merchant payments above ₹2,000. Those will now carry a 0.4 percent charge that the merchant must absorb.

The Legal Challenge

The Supreme Court petition challenges the amendment on procedural grounds. It argues that a levy affecting millions of merchants across the country cannot rest on a circular and a press release alone. The petitioners contend that Section 10A was not amended through the legislative or regulatory process that would normally govern such a change.

The case does not directly challenge the fee itself. It challenges where the fee was published and whether that publication carries legal weight.

The government has defended the arrangement as proportionate and targeted, noting that the largest fees apply only to the highest-value transactions and that smaller merchants remain protected.

The outcome of the Supreme Court petition will determine whether the 15 October implementation proceeds on its current legal footing or faces further scrutiny.

The charge itself is modest. The question is whether modest charges can be levied without gazette publication—or whether that omission matters enough to stop them.