Paytm shares tumble 10% as govt dismisses reports on merchant discount rates

Shares of One97 Communications, the parent company of digital payments platform Paytm, dropped as much as 10% to Rs 864.20 on the BSE on Thursday (June 12), registering their sharpest single-day decline since last year.

The drop came after the Finance Ministry dismissed several news reports on the possible reintroduction of merchant discount rates (MDR) on Unified Payments Interface (UPI) transactions. 

MDR is a fee merchants pay to banks or payment service providers for processing debit/credit card or UPI transactions.

In a post on X, the Finance Ministry reiterated that it has not introduced any MDR on UPI transactions, refuting the ongoing speculation.

“Speculation and claims that the MDR will be charged on UPI transactions are completely false, baseless, and misleading. Such baseless and sensation-creating speculations cause needless uncertainty, fear and suspicion among our citizens,” read the post. 

“The Government remains fully committed to promoting digital payments via UPI,” it added. 

The zero MDR regime for UPI transactions has been in place since January 2020, following a government mandate to push the adoption of digital payments. To further encourage low-value transactions, the government introduced an incentive scheme in March 2019, offering a 0.15% incentive on UPI payments below Rs 2,000. 

In March, the Payments Council of India, an industry body representing digital payment firms, wrote to Prime Minister Narendra Modi urging the reintroduction of MDR on UPI and RuPay debit card transactions. The council proposed a 0.3% MDR on UPI payments made to large merchants and a nominal MDR on RuPay debit card transactions across all merchant categories.

While PhonePe and Google Pay currently rule the digital payment space, newer entrants such as Navi, BHIM, Super.Money, and CRED are slowly expanding their footprint by offering cashback rewards and other user incentives.

Paytm recently introduced a new feature that allows users to create personalised UPI IDs, allowing them to make payments without revealing their phone numbers. The move aims to enhance user privacy and security during UPI transactions.

Shares of One 97 Communications Ltd. are currently trading 5.71% lower at Rs 902.80.