12 Jun , 2025 By : Debdeep Gupta
Paytm shares crashed over 10 percent on June 12 after the Finance Ministry issued a clarification that no merchant discount rate (MDR) will be charged on UPI transactions.
The shares of the fintech company were trading at Rs 864 apiece in the morning to emerge as the top loser on the Nifty Midcap index.
Finance Ministry's clarification came after reports suggested that the government is planning to introduce MDR on transactions worth Rs 3,000 and above to support banks and payment solution providers.
The reports had further claimed that the government may permit lenders to levy MDR on the transaction value rather than merchant turnover. Paytm shares had surged to over a three-month high of Rs 978 apiece after the reports surfaced.
Finance Ministry took to X in the post market hours of June 11 to issue the clarification. "Speculation and claims that the MDR will be charged on UPI transactions are completely false, baseless, and misleading," it said.
"Such baseless and sensation-creating speculations cause needless uncertainty, fear and suspicion among our citizens. The Government remains fully committed to promoting digital payments via UPI," it added.
MDR is a fee which banks charge merchants for processing payments in real time. Earlier, merchants were charged an MDR fee amounting to 1 percent of the total transaction value on card payments. Later in 2020, the government waived off MDR charges to promote digital payments in the country.
Earlier this year, the Payment Council of India urged Prime Minister Narendra Modi-led government to reconsider Zero MDR policy for UPI transactions. In its letter, the industry body highlighted the pressing financial sustainability concerns facing the digital payments ecosystem due to the continued Zero MDR policy, which has been in effect since January 2020.
While the government has provided financial incentives to offset some of the ecosystem's operational costs, the letter points out that the Rs 1,500 crore allocation covers only a fraction of the estimated Rs 10,000 crore annual cost required to maintain and expand UPI services.
To address the challenge, the industry proposed the introduction of an MDR for RuPay debit cards for all merchants and a reasonable MDR of 0.3 per cent for UPI only for large merchants.
Finance Ministry's clarification also negatively impacted Mobikwik's share price, which fell nearly 1 percent in the morning.
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