Paytm Payments Bank Ltd (PPBL) has suffered a massive loss of Rs 26,000 crore after the Reserve Bank of India (RBI) banned it from accepting deposits or top-ups in any customer account, prepaid instruments, wallets, and FASTags after February 29, 2024. This action by the RBI, initiated on January 31, 2024, was based on a comprehensive system audit report and subsequent compliance validation report by external auditors. These reports uncovered persistent non-compliances and continued material supervisory concerns in PPBL, prompting further supervisory action .
Why RBI Banned Paytm Payments Bank
The RBI’s decision to act against PPBL follows a series of regulatory actions taken against the bank since March 2022. Earlier, on March 11, 2022, the RBI had prohibited PPBL from onboarding new customers with immediate effect, citing “material supervisory concerns” observed at the bank. The regulator had also directed the bank to appoint an information technology (IT) audit firm to conduct a comprehensive system audit of its IT system.
According to the RBI Governor Shaktikanta Das, there is limited scope for reconsidering the measures taken against Paytm Payments Bank. Das has emphasized that there is hardly any room for a review of the action. Speaking during a press interaction in New Delhi, Das reiterated that the central bank takes action against regulated entities only after conducting a thorough evaluation. He emphasized the RBI’s commitment to supporting the fintech sector while ensuring the protection of customers’ interests and maintaining financial stability.
What It Means For Paytm’s Future
The RBI ban on PPBL has dealt a severe blow to Paytm’s ambitions of becoming a small finance bank and expanding its financial services offerings. The ban has also eroded the confidence of investors and customers in the fintech company, which had raised Rs 18,300 crore in its initial public offering (IPO) in November 2022. The company’s share price has plummeted by more than 60% since its listing on November 18, 2022.
The ban has also affected Paytm’s payment aggregator subsidiary, Paytm Payments Services Ltd (PPSL), which has sought a license from the RBI to operate as a payment aggregator. According to a PTI report, the government is currently scrutinizing foreign direct investments from China in PPSL. The focus is on Chinese investments in PPSL, which holds about 49% stake in PPBL.
Paytm has said that it is working closely with the RBI and other regulators to resolve the issues and comply with all the norms. The company has also assured its customers that their money is safe and they can withdraw or use their balances without any restrictions . However, it remains to be seen how long it will take for Paytm to regain its lost ground and restore its reputation in the market.
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