Paytm shares plunged over 10% on June 12, dropping to ₹864 apiece in morning trade. The slump followed a clear-cut statement from the Finance Ministry: No, India is not introducing MDR charges on UPI transactions.
Just a day earlier, market excitement had pushed Paytm’s stock to a three-month high of ₹978. Why? A rumor spread that the government might allow banks to levy Merchant Discount Rate (MDR) on UPI payments over ₹3,000. For Paytm and other digital payment players, that sounded like a long-awaited financial lifeline.
Then reality hit—and it hit hard.
What does this mean for the average person?
Good news if you’re a shopper. Your UPI transactions remain free. No hidden fees. No extra cost at checkout.
But for fintech firms like Paytm, this is a blow. They were hoping to finally charge something for every swipe, scan, or tap. Instead, the government doubled down on zero MDR. That’s free service for users, but tight margins for the companies running the rails.
As one investor joked online, “UPI remains free. And so is the fall in Paytm’s stock.”
The Bigger Picture
UPI is India’s crown jewel in digital payments—fast, free, and frictionless. But it costs money to run. Banks and payment providers foot the bill, and right now, there’s not much coming back to cover that.
In 2020, India removed MDR charges on UPI and RuPay cards to boost adoption. It worked. Today, UPI processes over 14 billion transactions a month. But free doesn’t mean cheap. The Payment Council of India says maintaining the ecosystem costs over ₹10,000 crore per year. The government’s subsidy? Just ₹1,500 crore.
Speculation and claims that the MDR will be charged on UPI transactions are completely false, baseless, and misleading.
Such baseless and sensation-creating speculations cause needless uncertainty, fear and suspicion among our citizens.
The Government remains fully committed…
— Ministry of Finance (@FinMinIndia) June 11, 2025
That gap is starting to hurt.
Earlier this year, industry leaders asked the government to reconsider the “Zero MDR” policy—especially for high-value merchants. Their proposal: allow a 0.3% MDR on UPI for large merchants and reintroduce MDR for RuPay. But that request hasn’t gone anywhere.
And now, with this latest denial, it’s clear: the government is sticking to its guns. UPI will stay free for users—even if it burns a hole in someone else’s pocket.
Collateral Damage
It’s not just Paytm. Shares of Mobikwik also dipped nearly 1% after the clarification. Fintech investors are worried. Free is a great policy—until you’re the one footing the bill.
For Paytm, this crash is a hard reset. Hopes were high after the MDR buzz, but now the message is clear: India’s digital payments are staying zero-cost for users, whether fintechs like it or not.
The real question? How long can this model hold before the system cracks?
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