The Reserve Bank of India (RBI) has tightened the reins on Paytm’s banking operations. Earlier this week, the central bank directed Paytm’s banking wing to cease accepting fresh funds in customer accounts and halt new top-ups on popular wallets from March. The repercussions of this directive are significant, as Paytm’s operations are intricately linked to its banking sector.
Paytm’s market worth nosedived to a mere $3.7 billion post the tumultuous week at the Mumbai bourses, marking a substantial $2 billion decline. The shares plummeted, hitting the 20% daily limit on consecutive days, Thursday and Friday.
Following RBI’s directives, shares of One97 Communications Ltd, the parent company of Paytm, plummeted 40% over two days. The stock hit its lowest permissible limit of Rs 487.05 on the BSE on Friday, eroding the company’s market capitalization by Rs 17,378.41 crore to Rs 30,931.59 crore.
RBI’s clampdown on Paytm Bank stems from grave concerns over money laundering and KYC non-compliance. Allegations suggest dubious transactions involving substantial sums between Paytm and its banking subsidiary. Consequently, RBI has mandated Paytm Payments Bank Ltd (PPBL) to suspend major operations, including customer deposits, credit transactions, and wallet top-ups beyond February 29.
Clients of Paytm can utilize existing deposits and wallet funds until the stipulated date. Post-February 29, unless the RBI’s stance softens, wallet top-ups and related transactions will cease.
The PPBL faces accusations of maintaining numerous non-KYC compliant accounts and allowing the use of single PANs for multiple accounts. Transactions exceeding regulatory thresholds hint at potential money laundering activities. Of the roughly 35 crore e-wallets under Paytm Payments Bank, an overwhelming majority, about 31 crore, are dormant, raising suspicions of misuse.
As regulatory pressures mount, the future of Paytm’s banking operations hangs in the balance, with far-reaching implications for its market stance and customer base.
(With inputs from agencies)