Daijiworld Media Network - New Delhi

New Delhi, Sep 28: The Supreme Court on Monday issued notices to the Centre, Reserve Bank of India (RBI) and National Payments Corporation of India (NPCI) on a public interest litigation challenging the introduction of Merchant Discount Rate (MDR) charges on specified UPI transactions.

A bench headed by Chief Justice of India Surya Kant and comprising Justices Joymalya Bagchi and V Mohana sought clarity on the legal basis of the new charges and questioned whether the levy amounts to a fee or a tax. The court also asked under which law the amount was being collected.

The RBI's counsel told the court that the government does not receive the MDR and that the charges are collected within the payment ecosystem by banks and payment platforms. The government has also stated that MDR is neither a tax nor a charge collected by the government or NPCI, but is distributed among participating banks and payment service providers.

The court, however, declined to grant an interim stay on the implementation of the new framework, which is scheduled to take effect from October 15.

Under the framework, a 0.4 per cent MDR will apply to specified person-to-merchant UPI transactions above Rs 2,000, subject to applicable exemptions and caps.

The Centre and other respondents have been directed to file their counter affidavits within four weeks. The PIL challenges the legal basis of the new MDR framework and seeks relief against its implementation.