Paytm, India’s leading digital payments platform, is facing a regulatory crisis that threatens its banking and wallet operations. The Reserve Bank of India (RBI) has ordered Paytm Payments Bank (PPBL) to stop accepting new deposits from customers and merchants by February 29, 2024, following an audit that revealed non-compliance with KYC norms. The RBI has also reportedly launched an investigation into possible violations of foreign exchange laws by Paytm.
In a bid to resolve the issue, Paytm founder and CEO Vijay Shekhar Sharma met with Finance Minister Nirmala Sitharaman and RBI officials this week, according to sources familiar with the matter. Sharma reportedly requested an extension of the deadline by a month, citing the interests of millions of Paytm users and merchants who rely on PPBL for their transactions. However, he was told to sort out the matter directly with the RBI, as it was a regulatory matter.
The RBI is expected to issue some clarification on the Paytm case, considering its user base and reach. Financial services secretary Vivek Joshi hinted at the move, adding that the RBI had taken the present step in the interest of consumer protection. The RBI may also consider either cancelling the license of PPBL or superseding its board after the settlement of all pipeline transactions and nodal accounts by March 15, 2024.
Paytm has more than 3 crore merchants on its platform, of which around 20 percent, or around 60 lakh, use PPBL as their settlement account. Also, for most of the UPI addresses on the Paytm app, the sponsor bank – technically called payment service provider (PSP bank) – is PPBL. Paytm is expected to migrate all these accounts to third-party banks before February 29 for the UPI payments to work seamlessly. UPI accounts for more than 90 percent of the gross merchandise value on Paytm.
The regulatory trouble has also taken a toll on Paytm’s share price, which hit a record low earlier this week after a massive three-day sell-off. The shares have lost more than $2.5 billion in value since the RBI’s order last week, before a subsequent bounce. Earlier this week, Indian billionaire Mukesh Ambani’s Jio Financial Services denied media reports it was buying Paytm’s wallet business. Paytm also dismissed the reports as “speculative, baseless and factually incorrect.”
Paytm spokesperson has also denied any violation of foreign exchange laws, calling them “unfounded and factually incorrect.”
Add Comment