10% Drop in Paytm Shares After Finance Ministry’s UPI Clarification

Shares of One 97 Communications, Paytm’s parent company, plummeted 10% to an intraday low of ₹864.20 on the BSE, marking the steepest single-day decline since February 2024. The crash followed a Finance Ministry statement debunking rumors of a Merchant Discount Rate (MDR) on UPI transactions, dashing hopes of new revenue streams for fintech firms. The clarification, posted on X, labeled such reports as “false, baseless, and misleading,” reaffirming the government’s commitment to free UPI payments.

Finance Ministry Shuts Down MDR Speculation

The Finance Ministry’s statement came in response to media reports suggesting MDR charges might be introduced on large UPI transactions to support payment providers like Paytm. MDR, a fee merchants pay for processing digital payments, was waived in 2020 to boost digital adoption. The Payments Council of India had advocated for its reintroduction, citing the ₹10,000 crore annual cost of maintaining UPI infrastructure. However, the ministry’s firm denial quashed expectations, triggering a sell-off in Paytm shares. By 10 AM, trading volumes spiked with 8.06 crore shares changing hands, reflecting investor disappointment over lost monetization prospects.

Impact on Paytm’s Financial Outlook

Paytm, a major UPI player handling 80% of India’s retail transactions, relies heavily on payment processing margins. Analysts at UBS noted that the absence of MDR or increased government incentives could slash Paytm’s FY26-27 adjusted EBITDA by over 10%. The stock, already volatile with a year-to-date decline of 11%, fell below its 5-day and 10-day moving averages, signaling bearish sentiment. Technical analysts predict further downside, with support levels at ₹815-820, as investors reassess Paytm’s profitability roadmap without MDR revenue.

Broader Implications for Fintech

The ministry’s stance underscores India’s push for accessible digital payments, with UPI processing 18.68 billion transactions worth ₹25.14 lakh crore in May 2025. However, the zero-MDR policy strains fintech firms’ margins, raising questions about sustainable growth. As Paytm navigates this setback, investors and industry players await clarity on alternative revenue models to support India’s booming digital payment ecosystem.