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Home ยป PayTM restricts 10% amid rumors of government cancellation of MDR – Is the expansion of UPI in India becoming a challenge for fintech companies? More details here.
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PayTM restricts 10% amid rumors of government cancellation of MDR – Is the expansion of UPI in India becoming a challenge for fintech companies? More details here.

3 Mins Read
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Paytm’s Stock Plummets Amid MDR Rejection

The Ministry of Finance’s recent and categorical rejection of proposals to reintroduce the Merchant Discount Rate (MDR) for Unified Payments Interface (UPI) transactions has sent shockwaves through the market. This decision has left many investors and market observers disappointed, significantly impacting Paytm and other fintech companies.

On Thursday, shares of One 97 Communications Ltd., Paytm’s parent company, saw a drastic drop of 10%, hitting Rs 864.40. This decline came in response to the Indian government’s denial of reports suggesting that a charge on payments exceeding Rs 3,000 could be implemented to support banks and payment service providers.

The Ministry of Finance explicitly stated, “Speculations about MDR on UPI transactions are completely unfounded and misleading.” They emphasized the need to eliminate unnecessary fear and uncertainty among citizens regarding digital payment transactions, aiming to clarify the government’s stance on the matter.

No Relief for Fintech Under Zero MDR Policy

The current Zero MDR policy, in place since January 2020, has drawn criticism from both the fintech and banking sectors. Despite government incentives of Rs 1,500 crore during the fiscal year, the Payments Council of India (PCI) estimates maintaining the UPI infrastructure costs about Rs 10,000 crore annually.

In March, the PCI, which represents over 180 non-banking payment service providers, urged the government to reconsider the Zero MDR regime. They proposed introducing a 0.3% MDR for larger UPI merchants to ensure the financial viability of the digital payments ecosystem.

Analyst Insights: UBS Warns of Reduced Profits for Paytm

In light of the Ministry’s recent statements, Swiss brokerage UBS provided its analysis, stating that the absence of MDR or improved government support represents a significant risk for Paytm’s future profitability. They maintained a “Neutral” rating with a target price of Rs 1,000 per share, indicating cautious outlook for investors.

Digital Payment Boom, Yet Challenges Persist

While India’s UPI ecosystem continues to expand rapidly, recording an astounding 80% of all retail digital transactions during the fiscal year, the financial strain on fintech firms remains unanswered. The total value of UPI transactions surged to Rs 23.48 lakh crores in January 2025, yet the sustainability of this growth is threatened by the lack of MDR or adequate compensation from the government.

Although the Indian government reaffirms its commitment to fostering free digital transactions through UPI, fintech players like Paytm are grappling with significant revenue compression. Current developments have raised further concerns regarding the long-term viability of the digital payments model in India.

The Ministry’s clear stance reinforces their commitment to promoting digital payments, but without a viable roadmap for cost recovery for payment companies. As the fintech sector continues to advocate for monetization mechanisms, Paytm’s recent share decline may just be the beginning of challenges ahead if the income discrepancies persist.

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Trump seeks to eliminate AI regulations to secure victory in the AI competition, according to NPR.

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