Paytm’s Vijay Shekhar Sharma Says He Has No Margin Loans Or Pledged Shares Against Ownership

Paytm founder and chief executive officer (CEO) Vijay Shekhar Sharma has informed exchanges that he has not taken any margin loans, or pledged any shares, whether directly or indirectly owned by him.

This comes hours after the Reserve Bank of India (RBI) directed Paytm Payments Bank to cease accepting new deposits in its accounts or wallets after February 29.

As part of this regulatory action, Paytm has been informed that it cannot undertake fresh deposits, support credit transactions, or provide fund transfers, including the Unified Payments Interface (UPI) facility, beyond the specified date.

Paytm Payments Bank, associated with One 97 Communications Limited (OCL), is taking immediate steps to comply with RBI’s directions. OCL, a payments company, works with various banks, not just Paytm Payments Bank, on various payment products.

In an exchange filing on February 1, Paytm said that its wholly-owned banking subsidiary “is taking immediate steps to comply with RBI directions, including working with the regulator to address their concerns as quickly as possible.”

In response to the directive to terminate the nodal account of OCL and Paytm Payments Services Limited (PPSL) by February 29, 2024, both entities will transition the nodal account to alternative banks within this timeframe. 

OCL is actively seeking collaborations with various banks to diversify its payment product offerings for customers. Importantly, OCL’s additional financial services, encompassing loan distribution, insurance distribution, and equity broking, remain independent of Paytm Payments Bank Limited and are anticipated to remain unaffected by this regulatory direction.

According to the exchange filing made by Paytm, the latest RBI action will cost the listed fintech giant INR 300-500 Cr in annual EBITDA going forward.

Meanwhile, brokerage firm Jefferies has downgraded the payment aggregator to ‘underperform’ from a ‘buy’ call and reduced the target price for the stock by more than half to INR 500 from INR 1,050.

Jefferies’ new target price reflects a downside potential of over 34% for the Paytm stock.

Paytm Payment Bank’s Frequent Run-Ins With The RBI

This is not the first time Paytm Payments Bank has come into RBI’s crosshairs. According to the January 31 RBI press note, the action comes after Paytm Payments Bank’s “persistent non-compliance and continued material supervisory concerns”.

In October last year, the central bank slapped the listed fintech giant’s subsidiary with an INR 5.39 Cr penalty for non-compliance with know-your-customer (KYC) norms. 

At the time, the RBI also flagged six major issues with the payments bank, including failure to identify beneficial owners in respect of onboarded entities for providing payout services, the failure to monitor payout transactions and carry out risk profiling of entities availing payout services, and failure to report cybersecurity incidents without delay.

In March 2022, the RBI directed Paytm Payments Bank to stop onboarding new customers, a restriction which is still ongoing. While the payments bank expressed hope in September 2023 that the restrictions might be lifted in March 2024, the latest RBI action might have thrown a spanner in the works on that front.