Shares of One 97 Communications, which owns Paytm, fell nearly 10% on Thursday, the biggest drop since February 2024. This happened after the Finance Ministry denied rumors about bringing back the Merchant Discount Rate (MDR) on UPI payments. MDR is a fee merchants pay to payment service providers. Earlier, hopes of MDR returning had lifted Paytm’s stock, as it could bring in more revenue. However, the government said UPI would stay free for both users and merchants. As a result, investors sold off shares. Experts say fintech companies still face challenges making profits due to strict rules and fewer ways to earn.
What sparked the tumble?
- Rumors recently spread that the government might start charging MDR fees on UPI payments over ₹3,000. MDR is a fee that merchants usually pay for digital transactions.
- On June 11, the Finance Ministry clearly said these rumors were “completely false, baseless, and misleading.” They confirmed that there are no plans to add any MDR charges to UPI.
- The government gave this statement to make sure people know that UPI will stay free, just like it is now.
Market impact
- Paytm’s share price dropped sharply to around ₹864.40 during the day, falling from over ₹960 at the market open. Although it recovered a little, it still ended the day nearly 8% lower.
- The broader Nifty 50 index also fell slightly by about 0.2%, mainly due to weak global markets and rising geopolitical tensions.
- According to UBS, if the government doesn’t allow merchant fees, Paytm’s profit margins could shrink. They expect Paytm’s core profits for 2026–27 to drop by more than 10% because of this.
Why MDR matters for Paytm
- MDR is a fee that merchants pay for processing digital payments. Banks and companies like Paytm usually collect this fee.
- To encourage digital payments, the government removed MDR charges for UPI. Right now, merchants don’t have to pay anything for UPI transactions.
- In March, the Payments Council of India asked the Prime Minister to bring back a 0.3% MDR on high-value UPI and RuPay payments made by big merchants.
Since MDR is not allowed, fintech companies like Paytm depend on more transactions and government incentives to earn money. This raise concerns that without MDR, their future profits may go down.
Performance metrics and market sentiment
- UPI saw strong growth in May, handling 18.68 billion transactions worth ₹25.14 lakh crore. This was a 33% increase compared to last year.
- UPI now makes up 48.5% of all real-time payments in the world. PhonePe and Google Pay lead the market with over 80% share, while Paytm is still an important player but has a smaller share.
- Right now, Paytm’s stock shows a weak trend on technical charts. Analysts say if the price falls below the current level, it could drop further to around ₹815–₹820.
Wider market dynamics
Indian stocks fell because of tensions between the U.S. and China, along with conflicts in the Middle East. These issues pushed up oil prices and made investors worried. At the same time, Paytm’s big drop shows that fintech companies react quickly to changes in government rules and policies.
Key Takeaways
The Finance Ministry said there are no plans to charge fees (MDR) on UPI payments.
1. Stock Market Reaction:
Right after this news, Paytm’s stock dropped almost 10%.
2. Money Impact:
According to UBS, Paytm could lose more than 10% of its core earnings in FY26–27 if it can’t charge fees on UPI.
3. UPI Growth:
In May, UPI handled 18.68 billion payments worth ₹25.14 lakh crore.
PhonePe and Google Pay still lead the market, while Paytm has a smaller share.
4. Investor Concerns:
Investors feel unsure because fintech companies have fewer ways to make money.
Also, sudden changes in government policy make them more worried.
Looking ahead
Stock Update:
Technical experts say if Paytm’s stock stays steady or moves between Rs 800 and Rs 820, it could be a good chance to buy.
What Could Help Paytm Grow?
Paytm’s future growth might depend on:
- Offering new incentive plans,
- Changing fees for merchants, or
- Shifting focus to financial services like loans and insurance.
If the government signals to bring back charges like MDR or other transaction charges, it could greatly affect how Paytm and similar companies earn money.
End Note
Some people thought the government would start charging fees on UPI transactions, but this was just a rumor. However, this rumor shook market confidence and caused Paytm’s shares to drop sharply. This situation shows how important clear rules are for fintech companies in India. Since UPI is more popular than ever, Paytm’s future will depend on finding new ways to make money if it can’t earn from MDR fees.
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