Paytm shares drop 10% amid heavy volumes; here is why the stock has tanked

Shares of the parent of payment solutions provider Paytm, One97 Communications, fell as much as 10% to hit an intraday low of ₹864.40 on the National Stock Exchange. On the BSE, Paytm shares declined as much as 9.97% to hit an intraday low of ₹864.20. The sharp fall in Paytm shares came after Finance Ministry set aside speculations on implementation of Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions.

Finance Ministry in a post on social media on Wednesday said, "Speculations 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 to promoting digital payments via UPI."

MDR is a rate charged to a merchant for processing payments from debit and credit cards.

Media reports suggested that government may leavy MDR on UPI transactions.

Paytm shares were witnessing heavier than usual trading volumes as 83.29 lakh shares changed hands on the NSE within 30 minutes of market opening as against an average of 41.67 lakh shares. On the BSE, 3.71 lakh shares changed hands as against an average of 2.77 lakh shares traded daily in the past two weeks.

To promote digital transactions, the government made the Merchant Discount Rate (MDR) zero from January 2020 for RuPay debit cards and BHIM-UPI payments.

To further support stakeholders in the payments ecosystem, the government launched the "Incentive Scheme for Promotion of RuPay Debit Cards and Low-Value BHIM-UPI Transactions (P2M)". The scheme specifically covers UPI person-to-merchant (P2M) transactions of up to ₹2,000 made by small merchants.

In May alone, UPI processed 18.68 billion transactions, amounting to a total value of ₹25.14 lakh crore, up from ₹23.95 lakh crore in April.

As of 9:46 am, Paytm shares traded 7.52% lower at ₹888, underperforming the BSE500 index which was down 0.19%.