Paytm Shares Plunge 10% After Finance Ministry Denies MDR Fee Rumors
Shares of One 97 Communications, the parent company of leading digital payments platform Paytm, plunged by up to 10% on Thursday, hitting an intraday low of Rs 864.20 on the BSE. This sharp decline followed the Finance Ministry’s official denial of reports suggesting the possible introduction of a merchant discount rate (MDR) fee for UPI (Unified Payments Interface) transactions.
Why Did Paytm Shares Crash?
The sell-off was triggered by widespread speculation that the government might reintroduce MDR charges on UPI payments. MDR is a fee that banks and payment service providers like Paytm charge merchants for processing digital transactions. Currently, to promote the adoption of digital payments across India, the government has waived MDR fees on UPI transactions, making UPI a zero-cost payment method for merchants and consumers alike.
Finance Ministry’s Clarification
The Finance Ministry swiftly dismissed these rumors, reiterating its commitment to keeping UPI transactions free from MDR charges. In an official statement, the ministry clarified that there is no proposal under consideration to impose MDR on UPI payments, aiming to dispel market uncertainties and support the ongoing growth of digital payments in India.
Impact on Digital Payment Stocks
The clarification brought some relief to the market, but the initial panic led to a significant drop in Paytm’s share price. Other digital payment and fintech stocks also experienced volatility amid the speculation.
What is MDR and Why Does It Matter?
- MDR (Merchant Discount Rate): A fee paid by merchants to banks or payment service providers for processing digital transactions.
- UPI Payments: UPI is a real-time payment system developed by NPCI, enabling instant money transfers between bank accounts via mobile devices.
- Current Policy: The Indian government has waived MDR on UPI and RuPay transactions to encourage digital payments and financial inclusion.
Industry Perspective
Many fintech companies and banks have previously advocated for the reintroduction of MDR to cover infrastructure and operational costs. However, the government’s stance remains focused on boosting digital payment adoption by keeping UPI transactions free for both merchants and consumers.
