Paytm Logs Biggest One-Day Drop Since 2024 Amid MDR Speculation-Driven Panic

12 Jun 2025 , 12:26 PM

Shares of One97 Communications, the company behind Paytm, dipped nearly 10% on June 12, marking the sharpest single-day fall for the stock in over a year. The decline was triggered by widespread speculation that the government might reintroduce a Merchant Discount Rate (MDR) on UPI transactions.

Several media outlets carried reports suggesting MDR charges could return, leading to investor concern about Paytm’s revenue model, which relies heavily on UPI-driven merchant payments.

Shortly after the buzz, the Finance Ministry stepped in to clear the air. In a post on X (formerly Twitter), the ministry stated it had not introduced any such fee, dismissing the rumours as baseless.

While the clarification was intended to reassure the markets, the initial panic had already done its damage. Traders continued to unwind positions in Paytm, spooked by the idea that policy around digital payments could change suddenly.

For those unfamiliar with the term, MDR refers to the fee merchants pay to banks or service providers every time a customer makes a digital payment. That fee doesn’t go to one party alone. It’s split between the customer’s bank (called the issuer), the merchant’s bank (the acquirer), and the payment network (like NPCI for UPI or Visa for card payments).

Since January 2020, UPI payments in India have carried zero MDR, thanks to a government order aimed at boosting digital payment adoption especially for small-ticket transactions.

To make this zero-MDR model sustainable, the government introduced a separate incentive in 2019. For every transaction under ₹2,000, a 0.15% incentive is paid out and it’s divided among the banks and digital payment platforms that power the ecosystem.

For Paytm, these incentives form a key part of its payment infrastructure revenues. Any change in MDR policy or even just the perception of change could shift its cost and earning structure significantly.

Investors are now likely to watch the government’s next steps more closely, especially with UPI transactions continuing to scale in volume month after month. Though the government has officially denied any shift in MDR policy for now, the brief panic underscores a larger truth: in India’s digital payments space, regulatory stability is as important as innovation.

On June 12, 2025 at 12:36 PM, shares of One97 Communications are trading with a 5.55% dip at ₹907.10 in the National Stock Exchange.

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