Paytm May Face Up To INR 500 Cr EBITDA Hit Due To RBI Restrictions On Payments Bank

The Reserve Bank of India’s (RBI’s) restrictions on Paytm Payments Bank will impact Paytm’s annual EBITDA by INR 300-500 Cr, the fintech giant said in an exchange filing.

The development comes hours after the RBI barred Paytm Payments Bank from any deposits, credit transactions, or top-ups in any of its customer accounts. 

The banking arm of the listed fintech giant said it is working with the sector regulator to address concerns.

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”.

Paytm also informed the exchanges that the RBI notification does not impact user deposits in their savings accounts, wallets, FASTags and NCMC (National Common Mobility Cards) accounts, where they can continue to use the existing balances.

RBI, in a press release yesterday (January 31), said, “No further deposits or credit transactions or top ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards (National Common Mobility Cards), etc. after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime.”

Further, the RBI said that the Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd are to be terminated at the earliest, in any case by February 29, which gives the listed giant around four weeks to address the situation. In response to that, Paytm notified that both companies will move the nodal to other banks during this period. 

“OCL will pursue partnerships with various other banks to offer various payment products to its customers,” said Paytm.

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.