Supreme Court Rejects Plea to Halt 0.4% UPI Charge on Big Transactions
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims + Mains·
Digital Public Infrastructure and transaction costs: a GS3 and Ethics case study on formalization.
Why in news
The Supreme Court rejected a plea by petitioner Anjan Datta seeking an interim stay on the government's decision to levy a 0.4% charge on UPI person-to-merchant transactions exceeding ₹2,000.
Background
The government plans to implement a 0.4% charge on UPI person-to-merchant transactions over ₹2,000 starting October 15, 2026. The Supreme Court has directed the Union of India, RBI, and NPCI to file counter affidavits within four weeks regarding the legality of these charges.
Facts for Prelims
- FactUPI charge of 0.4% applies to person-to-merchant transactions over ₹2,000
- FactImplementation date for the new UPI charge is October 15, 2026
- BodyRBI (Reserve Bank of India) is involved in the regulatory oversight of the UPI transaction charges
Prelims practice question
What is the transaction amount threshold above which the 0.4% UPI charge applies?
- (a)₹2,000
- (b)₹1,000
- (c)₹500
- (d)₹5,000
Show answer
Answer: (a) ₹2,000 — The government plans to levy a 0.4% charge on UPI person-to-merchant transactions exceeding ₹2,000.
For Mains
Q. Discuss the potential impact of transaction-based charges on UPI on the formalization of the economy and the risk of a return to cash-based transactions.
Dimensions to cover in your answer
- Behavioral shift: Risk of transaction avoidance and return to cash for high-value payments
- Formalization hurdle: Potential friction in merchant adoption of digital payments due to transaction costs
- Regulatory balance: Balancing the need for infrastructure sustainability with the goal of a cashless economy
Keywords: Digital Public Infrastructure · Formalization of Economy · Transaction Costs · Cashless Economy · Monetary Policy
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