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Shares of digital payments firm Paytm fell as much as 10% on Thursday after India’s finance ministry denied reports suggesting fees could be introduced on UPI transactions — a claim it called “false and baseless.”
The stock posted its steepest intraday drop since February, before trimming losses to trade about 8% lower. The broader Nifty 50 index was down 0.2%.
UPI, India’s massively popular real-time payments network, currently does not charge users. While merchants do pay service providers like Paytm for handling transactions, the system itself remains fee-free — and that’s not changing, the ministry said.
The clarification triggered concerns for Paytm’s revenue outlook. Analysts at UBS called the development “sentiment negative,” warning that without increased incentives or fee changes, the company’s adjusted core earnings could fall more than 10% in FY26 and FY27.
Paytm, once a frontrunner in India’s fintech boom, has been navigating regulatory challenges and pressure on margins, especially as the government continues to push for zero-cost digital payments as a public good.
Earlier this year, Paytm received federal government approval to invest in its core payments gateway arm, offering a positive development for the beleaguered Indian fintech company.
The finance ministry approved Paytm’s investment in Paytm Payments Services Ltd. (PPSL). While Paytm did not disclose details of the approved investment, a report from Reuters, citing a senior finance ministry official, indicated that Paytm secured approval for a 500 million rupee (about $6 million) investment in its payments division.
The approval was required due to Ant Group Co.’s nearly 25% stake in One97 Communications Ltd., Paytm’s parent company, which categorized the proposed investment as a direct foreign investment.
Amid heightened scrutiny of Chinese investments, Paytm’s billionaire founder Vijay Shekhar Sharma acquired a 10.3% stake from Ant last year, increasing his shareholding to just over 24% and becoming the largest shareholder in One97.
The investment brings Paytm a step closer to securing a payments aggregator license, a status that allows entities to offer digital payments for online retailers and merchants. Paytm’s application for this license has been pending with the Reserve Bank of India since 2022 when the company was also barred from onboarding new online merchants.
Following the latest government approval, Paytm announced that PPSL would re-submit its application for the payments aggregator license. If granted, the license will enable PPSL to offer its services to new merchants, expanding its business reach.
Last year, the Reserve Bank of India ordered Paytm Payments Bank Ltd., another unit of Sharma’s fintech enterprise, to cease accepting new deposits. This directive impacted Sharma’s ambitions in the digital payments space. In response, Sharma has sought to form new partnerships with financial institutions to maintain his digital payments operations.
Paytm Payment Services remains one of the core components of the company’s business, accounting for a quarter of its consolidated revenue.
