Paytm, Mobikwik, Pine Labs rebound even as NPCI defers MDR on UPI; read why

Shares of fintech firms such as One 97 Communications (Paytm), Mobikwik and Pine Labs rebounded sharply from the day's low on Tuesday after the National Payments Corporation of India (NPCI) deferred the implementation of the merchant discount rates (MDR) on Unified Payments Interface (UPI) transactions. 

 

The MDR, which was to be applicable from October 15, will now come into force after Diwali, according to a notification by NPCI. Business Standard was the first to report that NPCI was considering deferring the MDR charges amid pushback from retail traders’ associations. However, the report pegged it at a much later date of January 1. READ MORE

 

The UPI and Services Steering Committee today decided that, keeping in mind the festive season, MDR on select person-to-merchant (P2M) UPI transactions shall be implemented immediately post Diwali on a date to be notified separately, NPCI said in a press release today. READ MORE

 Following this announcement, Paytm shares jumped 6.6 per cent from the day's low of Rs 1,571 on the National Stock Exchange (NSE) and were down less than a per cent at Rs 1673.90 as of 1.45 PM. 

 

Pine Labs and Mobikwik, meanwhile, turned positive for the day after languishing in the red. Pine Labs jumped 6.8 per cent from the day's low and was trading 1.25 per cent higher at Rs 165 apiece. Mobikwik, on the other hand, was up 0.6 per cent at Rs 242. It hit the day's low of Rs 230.41. An MDR is a fee paid by a merchant to the bank and payment company processing a digital transaction.  

 As announced earlier, a 0.40 per cent MDR would apply to merchant transactions above ₹2,000, also known as peer-to-merchant (P2M) transactions, subject to a cap of ₹300. Certain categories, including bill payments, utilities, education and fuel, would attract a flat fee of ₹5 per transaction above ₹2,000. 

Harshal Dasani, business head at INVasset PMS, said that today's NPCI's steering committee put it in writing as "immediately post Diwali, at a date to be notified," which is a deferral of weeks for the festive season rather than a quarter, which was expected earlier. "A fact that is less bad than the rumour produces a relief rally, and that is all today's move is."

 

What the deferral actually costs is the peak, he noted. "The quarter from October to December would have carried about 78 days of MDR; starting after November 8 leaves roughly 53, and the days surrendered are the busiest of the year. That is a one-time revenue loss of about a third of the quarter's incremental MDR, concentrated in the highest-value weeks, and it changes nothing about the run-rate from December onward," Dasani noted. 

According to a Business Standard report, UPI recorded a record average of 802 million transactions a day in September, with an average daily transaction value of ₹97,913 crore. Transaction volume rose 22.6 per cent from a year earlier to 24.07 billion in September, from 19.63 billion a year earlier. The total value of transactions increased 18 per cent to ₹29.37 trillion from ₹24.89 trillion. 

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