Shares of Paytm came under selling pressure, falling as much as 6.5 percent after the National Payments Corporation of India (NPCI) deferred the implementation of the proposed merchant discount rate (MDR) on select Unified Payments Interface (UPI) transactions. Other fintech stocks, including Pine Labs and One MobiKwik, also declined around 4 percent during the session

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The decision was announced by NPCI following a meeting of its UPI and Services Steering Committee. According to the organisation, the MDR on select person-to-merchant (P2M) UPI transactions will be implemented immediately after Diwali, with the specific date to be notified separately. The postponement comes ahead of the festive season, when digital payment activity typically increases.

The proposed MDR framework was outlined in an NPCI circular issued on September 15. Under the framework, a 0.4 percent MDR would apply to eligible P2M UPI transactions exceeding Rs 2,000. The charge would be paid by merchants rather than consumers, with the fee capped at Rs 300 for transactions of Rs 75,000 or more.

Different transaction categories would attract different charges. Payments involving essential services such as railways, telecom, fuel and insurance would carry a flat fee of Rs 5 per eligible transaction above Rs 2,000. Capital markets transactions, including mutual fund and stockbroking payments, would attract a lower MDR of 0.02 percent, subject to a cap of Rs 300. Person-to-person transfers and most everyday merchant payments would continue to remain free under the proposed framework.

The proposed charges are intended to establish a more sustainable revenue framework for India's digital payments ecosystem. However, the deferred implementation delays the potential realisation of revenue from eligible transactions and leaves payment companies and merchants awaiting clarity on the revised timeline.

NPCI Managing Director and Chief Executive Officer Dilip Asbe had previously indicated that the impact of the proposed MDR would be limited to a relatively small proportion of UPI transactions. According to his earlier comments, approximately 96 percent of transaction volume and 75 percent of the overall transaction value were not expected to attract charges. He also noted that large corporate merchants, many of which already accept credit card payments, could absorb a substantial portion of the additional costs.

India's merchant base was estimated at around 60 million, with approximately 75 percent of QR-code merchants reportedly not having received even a single transaction exceeding Rs 2,000. These figures suggest that the proposed MDR would primarily affect a narrower segment of higher-value merchant transactions rather than the broader UPI ecosystem.

For listed digital payments companies, the timing and structure of MDR implementation remain important considerations for their revenue outlook. However, the immediate share price declines do not establish the extent to which the postponement will affect individual companies' earnings, particularly given differences in their business models, merchant networks and exposure to eligible transactions.