Shares of One 97 Communications, the parent company of Paytm, surged over 7% on Wednesday, September 16, after the government announced the introduction of the first-ever Merchant Discount Rate (MDR) on certain UPI transactions above ₹2,000. The move has put the spotlight on a potential new revenue stream for digital payments companies, with brokerages raising their expectations for Paytm.
Paytm shares climbed as much as 7.2% to ₹1,856.50 per share, marking a fresh 52-week high. The stock has now soared 96% from its 52-week low of ₹947.10, hit in March 2026.
The rally followed the National Payments Corporation of India’s (NPCI) announcement on Tuesday that the government will introduce MDR on certain Person-to-Merchant (P2M) UPI transactions from October 15. Merchants will pay 0.4% on transactions above ₹2,000, while the maximum fee will be capped at ₹300 for payments of ₹75,000 or more.
What does the new UPI MDR mean for consumers and merchants?
Consumers will not be charged for UPI payments, while Person-to-Person (P2P) transfers will remain free. Small merchants under the P2PM framework, including vendors receiving up to ₹1 lakh a month through UPI QR codes, will also remain exempt from MDR.
Transactions of up to ₹2,000 will continue to carry zero charges and account for more than 95% of UPI’s P2M transaction volume, according to the government’s FAQ.
The NPCI has clarified that the MDR will be paid by merchants and cannot be passed on to customers. Therefore, consumers will continue paying the listed price while using UPI, without any separate transaction or platform fee being imposed by UPI apps.
Should you buy Paytm post the UPI MDR announcement?
The new framework has triggered a fresh debate around the monetisation of UPI and its potential impact on Paytm’s earnings. Brokerages have responded positively, although their estimates differ on the portion of UPI transaction value that would qualify for MDR.
Emkay Global Research maintained its ‘Buy’ call on Paytm and raised its target price to ₹2,400. The brokerage said the new framework replaces the earlier discretionary subsidy model with a contractual and recurring commercial revenue model.
“UPI acquiring now carries a commercial revenue model that is contractual, recurring, and scales with value, in place of a discretionary annual subsidy,” Emkay Global Research said, adding that this could make the payments business structurally self-sustaining and more resilient. It estimated Paytm could generate ₹1,120 crore in UPI MDR revenue in FY28, even under conservative assumptions.
Meanwhile, JM Financial also raised its Paytm target price to ₹2,150 per share, implying more than 24% upside from the stock’s previous closing price, while retaining its ‘Buy’ call.
The brokerage noted that the notified MDR rate was materially higher than the 25 basis points it had previously modelled. However, it also highlighted broader carve-outs and consequently reduced its eligible-GMV overlay to 20% from 30% earlier.
JM Financial also estimated that the new UPI charges could generate incremental revenue of ₹2.1 billion in FY27 and ₹4.7 billion in FY28.
“MDR converts a structurally zero-revenue GMV pool into ‘monetisable’ volume with nearly full flow-through to EBITDA, not to mention a clear resolution to the long-standing regulatory overhang on UPI monetisation,” it added.
Furthermore, Bernstein recently named Paytm its top pick, citing robust merchant lending growth, operating leverage and the potential introduction of MDR on UPI as key drivers of earnings growth.
With a ₹2,200 target price, Bernstein expects Paytm’s EPS to reach ₹78 by FY29. Even after excluding any potential impact from UPI MDR, its FY29E EPS estimate stands at ₹54, above the ₹46 consensus estimate.
RBI backs UPI MDR as digital payments scale
The Reserve Bank of India backed the introduction of MDR on large-value UPI transactions, saying the move would strengthen the long-term sustainability of India’s digital payments ecosystem. The central bank said the framework would allow UPI to continue scaling, innovating and serving consumers and businesses across the country.
For nearly seven years, UPI has grown increasingly popular because transactions can be completed quickly without additional charges. The government has repeatedly maintained that UPI will remain free for citizens and that P2P transactions will continue without charges.
While discussing the cost of digital-payment infrastructure in August, RBI Governor Sanjay Malhotra said, “Someone has to pay the cost.” He stressed that the RBI wants digital payments to remain accessible, affordable and safe, while also ensuring that the ecosystem remains sustainable.
The latest MDR framework therefore marks a significant shift in the monetisation landscape for UPI, while keeping the consumer-facing payment experience free for the specified transactions.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
