Why One 97 Communications, parent of Paytm, shares rose 5% in trade today?

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One 97 Communications, parent of Paytm, shares gained 5.3 per cent on BSE, logging an intraday high at Rs 700.7 per share. The stock rallied after reports suggested that Indian government may consider restoring merchant charges on UPI.

 

These charges, known as the merchant discount rate (MDR) in the payments industry, are fees merchants pay to banks to process real-time transactions. Currently, no MDR is applied to UPI and RuPay debit card payments, which are facilitated through the National Payments Corporation of India (NPCI).  

 

Around 11:58 AM, Paytm share price was up 4.57 per cent at Rs 695.55 per share on BSE. In comparison, the BSE Sensex was down 0.22 per cent at 73,954.65. The market capitalisation of the company stood at Rs 44,352.96 crore. The 52-week high of the stock was at Rs 1,063 per share and the 52-week low was at Rs 310 per share. 

 

As per reports, the banking industry's large merchants have made a formal request to reintroduce MDR on UPI transactions to the Union government, and the relevant departments are reviewing it. According to the proposal, MDR could be reinstated for merchants with an annual turnover exceeding Rs 40 lakh based on their goods and services tax (GST) filings.   

 

Besides, the government is also expected to mull a tiered pricing model for UPI, where larger merchants would incur higher charges, while smaller businesses would pay a reduced fee. For merchants with an annual turnover below Rs 40 lakh, UPI payments would remain free.  

The reintroduction of MDR will benefit Paytm in several ways, as it plays a crucial role in how digital payment platforms generate revenue. MDR is the fee charged to merchants for accepting digital payments, usually as a percentage of the transaction amount. The introduction of MDR allows Paytm to monetise its payment gateway services more effectively. 

 

The government removed MDR in the FY22 Budget to promote digital payments, merchants were charged a fee of under 1 per cent of the transaction amount. 

 

In the past one year, Paytm shares have gained 71 per cent against Sensex's rise of 0.8 per cent.