Paytm Payments Bank Gets Respite: RBI Extends Deadline For Fund Transfers, Customer Deposits Till March 15

In a partial relief to crisis-ridden Paytm, the Reserve Bank of India (RBI) on Friday (February 16) further extended the deadline for business restrictions on the fintech major’s banking unit, Paytm Payments Bank, to March 15 from February 29 announced earlier.

On January 31, the RBI clamped down on Paytm Payments Bank, barring it from taking any deposits or credit transactions or top-ups in any of its customer accounts. The central bank also stopped Paytm Payments Bank from providing any other banking services, such as UPI facility and fund transfers, after this month.

“No further deposits or credit transactions or top ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards, etc. after March 15, 2024 (extended from the earlier stipulated timeline of February 29, 2024)…,” said the central bank. 

RBI also allowed the payments bank to undertake other banking services, such as UPI facility and fund transfers, till March 15.

However, the Apex Bank refused to extend the timeline for the termination of the nodal accounts of “One97 Communications and Paytm Payments Services maintained by Paytm Payments Bank”. As per the RBI’s new order, these will have to be terminated by February 29. All pipeline transactions in nodal accounts, initiated before February 29, have to be settled by March 15, said the regulator.

Additionally, it also refused to change the deadline for the user withdrawal of balances from the payments bank’s accounts, prepaid instruments, FASTags, National Common Mobility Cards, among others. 

The order was issued by the RBI under Section 35A of the Banking Regulation Act, 1949. The Apex Bank cited the interest of the payments bank’s customers and merchants as the rationale behind the partial modification of the January 31 order. 

“Keeping in view the interest of customers (including merchants) of PPBL who may require a little more time to make alternative arrangements and the larger public interest,… directions are issued by the Reserve Bank of India under section 35A of the Banking Regulation Act, 1949 in partial modification of the earlier Directions dated January 31, 2024,” added the central bank.

The directions come a week after Paytm’s founder and chief executive officer (CEO) Vijay Shekhar Sharma met Finance Minister Nirmala Sitharaman and officials of the RBI seeking an extension of the deadline.

While the new directives are expected to offer some respite and help continue consumer-facing offerings, the sword still hangs over the company’s merchants business.

Following the RBI’s curbs on Paytm Payments Bank, investors dumped the shares of the company in droves. The company’s stock has been on a downward spiral since then, having tanked more than 50% in the past two weeks. 

Even the central bank’s governor Shaktikanta Das recently said there is “hardly any room” to review the action on the payments bank. Amid all this, reports have also surfaced that the company is being probed by the Enforcement Directorate for alleged forex violations, which the company has denied. 

Brokerage Macquarie recently downgraded Paytm operator One97 Communications to ‘underperform’ from an earlier ‘neutral’ rating and lowered its price target (PT) to INR 275 from INR 650. 

However, the stock bounced back strongly on Friday after days of bloodbath on the bourses. Shares of One 97 Communications hit a record low for the fifth consecutive day on Friday (February 16) during the intraday trading but closed the day 5% higher at INR 341.50 on the BSE.

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