The sharp decline in the stock price follows Finance Ministry’s clarification on reports about the possible introduction of a merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions.
This clarification comes after several media articles said that MDR charges could be reintroduced.
In a post on X, the Finance Ministry reiterated that it has not introduced any MDR on UPI transactions, refuting the ongoing speculation.
Global brokerage firm UBS has a ‘Neutral’ rating on One97 Communications, with a price target of ₹1,000 per share. Another brokerage, Morgan Stanley, said the development is particularly relevant for Paytm. Click here to find out what’s at stake for Paytm in the MDR debate.
What is MDR?
Merchant Discount Rate (MDR) is a fee paid by merchants to banks or payment service providers every time a customer makes a digital payment, like with a debit/credit card or UPI.
Who gets the MDR fee?
The MDR is shared among three main players in a payment transaction:
Issuer Bank (Cardholder’s Bank):
The bank that issued the customer’s card or UPI service.
It covers the costs of issuing cards/UPI accounts and handling payments.
Acquirer Bank (Merchant’s Bank/Payment Processor):
The bank or payment service provider that enables merchants to accept payments.
Provides payment solutions, terminals, and payment gateways.
Payment Network/Network Provider (Card/UPI Network):
The payment network facilitating the transaction (e.g., Visa, MasterCard, RuPay, NPCI for UPI).
Ensures smooth, secure, and fast transactions.
UPI Payments (Digital Payments in India):
Zero MDR for UPI has been in effect since January 2020. For transactions using UPI, MDR is zero due to government mandates to promote digital payments.
To promote low-value UPI transactions and boost digital payments, the government announced an incentive scheme in March 2019. Under this scheme, the government offers a 0.15% incentive per transaction for payments below ₹2,000. This incentive is shared among the customer’s bank (issuer bank), merchant’s bank (acquirer bank), payment service providers and app providers.
Shares of One 97 Communications Ltd. are currently trading 8.28% lower at ₹880.60. On a year-to-date basis, the stock has fallen 11%.
