--- title: "NPCI Tells Supreme Court UPI MDR Can't Be Passed to Customers" description: "In a counter affidavit filed on 3 November, the UPI operator defends a charge of up to 0.4% on larger merchant payments, says apps cannot add platform fees..." url: "https://bharat.digital/originals/npci-supreme-court-affidavit-upi-mdr-no-pass-through-nov-2026/index.md" canonical: "https://bharat.digital/originals/npci-supreme-court-affidavit-upi-mdr-no-pass-through-nov-2026/" published: "2026-11-08T05:05:00+04:00" updated: "2026-11-08T05:05:00+04:00" section: "Originals" type: "startup" author: "bharat.digital desk" image: "https://bharat.digital/img/originals/npci-supreme-court-affidavit-upi-mdr-no-pass-through-nov-2026-auto-37555ccc-og.jpg" language: "en-IN" site: "bharat.digital" --- # NPCI tells the Supreme Court that UPI's new merchant fee cannot be passed on to customers *In a counter affidavit filed on 3 November, the UPI operator defends a charge of up to 0.4% on larger merchant payments, says apps cannot add platform fees, and argues it is not the State under Article 12.* By bharat.digital desk. Startup, Startups & Fintech. Published 2026-11-08T05:05:00+04:00. 3 min read. ![NPCI tells the Supreme Court that UPI's new merchant fee cannot be passed on to customers](https://bharat.digital/img/originals/npci-supreme-court-affidavit-upi-mdr-no-pass-through-nov-2026-auto-37555ccc-hero.webp) ## At a glance - Company: National Payments Corporation of India (UPI MDR affidavit) - What it does: NPCI's defence of the 0.4% UPI merchant discount rate on person to merchant payments above Rs 2,000 - Based in: New Delhi - Latest: NPCI counter affidavit in Supreme Court defends UPI MDR framework - Date: 2026-11-03 The National Payments Corporation of India, which runs UPI, has defended its new merchant fee in the Supreme Court. In a counter affidavit filed on 3 November 2026 in Anjan Datta v. Union of India, NPCI answered a petition that challenges three things: the 2026 amendment to Section 10A of the Payment and Settlement Systems Act, 2007, made through the Taxation and Other Laws (Amendment) Act, 2026; the Finance Ministry notification of 14 September; and NPCI's circular of 15 September that brought in a revised merchant discount rate, or MDR, for UPI. MDR is a fee charged on the merchant's side of a payment and shared among the banks and apps that process and settle it. LiveLaw and ThePrint reported the affidavit on 5 and 6 November. The framework charges MDR of up to 0.4%, capped at Rs 300, only on person to merchant UPI payments above Rs 2,000. Person to person transfers stay free at any amount, and small merchants receiving up to Rs 1 lakh a month in UPI credits are exempt. ThePrint reports separate rates for some categories such as capital market payments, and a flat Rs 5 charge for specified essential and low margin sectors on eligible payments above Rs 2,000. NPCI told the court that about 96% of person to merchant transactions would remain untouched, either because they are below Rs 2,000 or because they come from exempt small merchants, and that the 0.4% ceiling is far lower than what card networks charge. The core worry in the petition is that merchants will simply push the cost on to buyers. NPCI's answer is that its circular bars this, and that the bar is binding rather than a policy assurance. Payer banks and UPI apps are tied to NPCI through service level agreements that require them to follow all its circulars, so a breach can lead to compliance action and even termination of UPI membership. NPCI also said UPI apps are not allowed to charge users platform fees or any other charge for UPI payments. It further proposed a fund to help small merchants with annual turnover of up to Rs 20 lakh adopt UPI, paid for by setting aside 5% of each participant's share of MDR. On the law, NPCI argued that it is a not for profit company owned by banks and other entities, not the State under Article 12, so the writ petition should not lie against it. It said the RBI authorised it to run UPI in August 2016 and that Sections 20 and 21 of the Act let it set the terms and charges of the system. The amended Section 10A, it said, only lists the payment modes protected from charges, which the 14 September notification set as RuPay debit cards with no limit and UPI payments up to Rs 2,000. On money, the affidavit cites a Parliamentary Standing Committee finding that the Rs 2,000 crore budget allocation meant to offset zero MDR covered only 11% of the industry's actual costs, and a Finance Ministry estimate of Rs 20,700 crore in operating costs for 2026-27. For shoppers and small shops, nothing changes yet. The fee was first meant to start on 15 October, but NPCI has postponed it and ClearingPost notes that no new start date is in force. The Supreme Court, which earlier declined to stay the framework and asked the Centre, the RBI and NPCI to respond, will now weigh whether NPCI's reading of its powers and the promised safeguards survive the constitutional challenge. ## Sources 1. [LiveLaw: Merchants Cannot Pass On UPI Charges To Customers, MDR Necessary To Sustain UPI Ecosystem: NPCI Tells Supreme Court](https://www.livelaw.in/top-stories/merchants-cannot-pass-on-upi-charges-to-customers-mdr-necessary-to-sustain-upi-ecosystem-npci-tells-supreme-court-557510) 2. [ThePrint: MDR charges needed to sustain UPI ecosystem, merchants can't pass them to customers, NPCI tells SC](https://theprint.in/judiciary/mdr-charges-needed-to-sustain-upi-ecosystem-merchants-cant-pass-them-to-customers-npci-tells-sc/3092196/) 3. [ClearingPost: NPCI Tells Supreme Court Merchants Cannot Pass UPI MDR On to Customers](https://clearingpost.com/insights/npci-tells-supreme-court-merchants-cannot-pass-upi-mdr-on-to-customers/) Written by the bharat.digital desk from the sources above. Figures are as reported by those sources.