NPCI upholds ban on passing UPI charges to consumers in Supreme Court filing

The National Payments Corporation of India (NPCI) has filed a counter-affidavit with the Supreme Court, asserting that its new Merchant Discount Rate (MDR) on UPI payments is legally sound and essential for system sustainability. The NPCI clarified that the charge, capped at 0.4%, applies only to person-to-merchant (P2M) transactions exceeding Rs 2,000, and explicitly prohibits apps or merchants from passing this cost to consumers.

According to the NPCI, the zero-MDR model has created a structural funding gap that limits investments in cybersecurity, infrastructure resilience, and fraud prevention. Data provided by the corporation suggests that approximately 96% of P2M transactions remain unaffected by the new charge due to their value being below the threshold. The NPCI maintains that the fee is a commercial arrangement between participants rather than a public tax.

Regarding enforcement, the NPCI stated that any entity imposing platform fees on consumers would be in breach of its service-level agreements, risking the termination of their UPI membership. While the original implementation date was set for mid-October, the NPCI confirmed that the rollout remains postponed as the legal challenge continues.