Paytm Shares Plunge upto 6% as Government Denies MDR on UPI Transactions

Shares of Paytm's parent company, One 97 Communications, fell sharply by 10% in early trade to the intraday low at ₹864.40. As of 11.25 AM, Paytm’s share price is trading at ₹900.95, declining by 6.20%. The decline in investor confidence followed a categorical denial of widespread speculation about the reintroduction of a Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions by the Finance Ministry.

The Zero MDR Policy Under Scrutiny

The stock had recently come under scrutiny amid speculation that the Government of India might reintroduce merchant discount rates (MDR) on UPI transactions. However, on Wednesday, the Ministry of Finance firmly dismissed these claims as "completely false, baseless, and misleading," assuring that no MDR would be levied on UPI payments. The Ministry also reiterated the government’s strong commitment to advancing digital payments via the UPI platform.

Earlier, it was reported by the media that the Centre was considering reintroducing MDR on UPI transactions above ₹3,000, as a step aimed at providing financial support to banks and other payment service providers. In March, the Payments Council of India (PCI), an industry association of 180 non-banking payment players, had called for reconsideration of the Zero MDR policy for UPI and RuPay debit card transactions. 

This policy, in operation since January 2020, has been said to stretch the payment system, with a government subsidy of ₹1,500 crore far short of the estimated ₹10,000 crore per year operational cost. To meet these financial viability issues, the PCI had suggested reintroducing MDR for RuPay debit cards and a 0.3% MDR for UPI transactions of large merchants.

Implications for Paytm and the Digital Ecosystem

The Ministry of Finance’s clarification denying any plans to introduce MDR on UPI transactions has been widely perceived as a setback for companies like Paytm.The possibility of MDR had been considered by others as a possible means of strongly enhancing net payment margins for payment service providers. The outright rejection of this by the Ministry has thus affected investor sentiment towards businesses that are dependent on such digital payment channels.

UPI's Ongoing Dominance

Even with these policy discussions, UPI continues to dominate the digital payments scene in India with its strong presence. In the 2024 financial year, UPI handled 80% of retail transactions, processing 131 billion transactions worth more than ₹200 lakh crore. January 2025 also saw a new monthly high, with 16.99 billion transactions collectively valued at ₹23.48 lakh crore. 

The government's insistence on zero MDR for UPI payments points to its commitment to facilitating deep digital penetration, even while the payment ecosystem struggles with the cost implications for its stakeholders of this policy. The market will continue to monitor policy evolution as it affects the sustainability and growth of India's digital payment infrastructure in transition.

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