Paytm Falls 10% After FinMin Clarifies No MDR Charges on UPI

On Thursday, the Paytm shares crashed 10 percent and touched a day’s low price of Rs. 864.40 per share on NSE. The shares reacted sharply after various reports said that the Finance Ministry dismissed reports on the imposition of Merchant Discount Rate (MDR) as “baseless and sensational,” while keeping its commitment to keeping Unified Payment Interface (UPI) transactions free of MDR. The Ministry’s strong word statement highlighted that such speculation only breeds unnecessary uncertainty and suspicion among citizens. 

This drew a sharp reaction, resulting in Paytm shares crashing by 10 percent. Earlier, the Payments Council of India had recommended the return of MDR for UPI transactions on large ticket transactions. It recommended 0.3 percent on UPI payments, nominal MDR on Rupay debit card transactions for merchants. MDR is a fee that banks or payment service providers like Paytm charge merchants for processing payments in real time. The government had previously waived MDR on UPI transactions to promote digital payments, making such transactions free for both merchants and consumers. This ensured exponential growth in UPI transactions and made it affordable and convenient for all users.

Paytm’s management had previously indicated during its Q4FY25 earnings call that the reinstatement of MDR could have a positive impact on the company’s monetisation strategy and margins, as competitiveness in the payments sector increases. CEO Vijay Shekhar Sharma acknowledged that MDR could allow Paytm to earn additional revenue, which is conservatively estimated at five to eight basis points of its gross merchandise value (GMV). However, with the Finance Ministry’s definite rejection, Paytm and its peers are expected to continue to operate under the current scheme in which UPI transactions remain free for merchants.

This MDR debate comes into play at a challenging time for Paytm, as it is looking to grow its revenue sources. In the quarter ending March 2025, Paytm reported a consolidated net loss of Rs. 545 crore, which is marginally better than the Rs. 550 crore loss in the same period last year due to exceptional items. 

However, the overall numbers for FY25 show a bit concerning with Paytm consolidated revenue from operations falling 31 percent to Rs. 6,900 crore, down from Rs. 9,978 crore in FY24. Net loss for the year was reduced by 54 percent to Rs. 663 crore, but the sharp revenue decline underlines the pressure on the company’s core business. The company attributed the revenue dip in part to seasonality and a lower government incentive for UPI transactions in FY25. Despite these headwinds, Paytm’s merchant subscriber base for payment devices expanded to 1.24 crore, and its monthly transacting users stood at 7.2 crore as of March 2025.

Paytm is still facing competition on multiple fronts. In the mobile payments space, it competes directly with giants like PhonePe and Google Pay, both of which have captured significant market share in India’s UPI ecosystem.

Moreover, the regulatory scrutiny, especially on the Payment Bank business, was a huge blow. The company is actively working to regain regulatory trust and strengthen its position, but the evolving landscape demands constant oversight and innovation.