The Supreme Court on Monday refused to stay Centre’s recent Merchant Discount Rate (MDR) on UPI person-to-merchant payments above Rs 2,000.

The government announced the MDR for UPI transactions on September 15 citing operational costs. The new rates, applicable on merchant payments will be applicable from October 15.

While the apex court bench of Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana refused to grant a stay on the government’s decision, it sought responses from the Centre and others on the petition challenging the MDR move. It has asked the government, along with the Centre, the Reserve Bank of India and others to file their counter affidavits within four weeks.

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The public interest litigation (PIL) was filed by advocate Anjan Datta, challenging the government’s decision to introduce MDR on some UPI merchant transactions, according to PTI.

What is the new UPI MDR rule?

Under the new framework, a 0.4% Merchant Discount Rate will be levied on specified UPI person-to-merchant transactions above Rs 2,000.

The new framework ends nearly six years of zero-MDR on UPI payments for specific transactions.

The new rule mandates that payments to merchants of up to Rs 2,000 will remain free, but payments above this threshold will attract o.4% MDR. However, the charge has been capped at Rs 300 for transactions above Rs 75,000.

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MDR has some exceptions

The government has exempted some essential services like railways, telecommunications, insurance, fuel and agricultural inputs. These sectors operating under thin margins will be charged a flat MDR of Rs 5 per transaction for payments above Rs 2,000.

Sectors like mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02%, with an upper limit of Rs 300 per transaction.

Meanwhile, monthly utility bills, OTT subscriptions, monthly investments and automated recurring payments won’t attract any MDR charges.

Does it affects common man?

The government has reiterated that the MDR charges will not affect consumers. The government has also “advised” banks to ensure that merchants do not pass MDR charges to customers.

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According to the Finance Ministry, the MDR charges is supposed to be “within the merchant payment ecosystem” and not on customers making UPI payments.

The MDR charges do not apply to person-to-person payments — meaning payments made to family members, friends or individuals — irrespective of the amount.