SUMMARY
The RBI could cancel the licence of Paytm Payments Banks once the deposits of its customers are safeguarded, post the February 29 deadline
The RBI has not taken any final decision on the matter and its plans may change based on Paytm’s representation
Earlier this week, the RBI barred the payments bank from providing facilities like UPI or accepting deposits from customers due to “persistent non-compliances”
The spate of troubles for fintech major Paytm continues unabated. The Reserve Bank of India (RBI) is now reportedly mulling the cancellation of the operating licence of Paytm Payments Bank next month.
The central bank could undertake the move once the deposits of the payments bank’s customers are safeguarded, post the February 29 deadline for the payments bank, Bloomberg reported citing sources.
As per the report, no final decision has been taken so far and the RBI’s plans may change based on Paytm’s representation.
Responding to questions from Inc42, a Paytm Payments Bank spokesperson said, “The recent direction from RBI is a part of the ongoing supervisory engagement and compliance process. The Bank always upheld compliance with supervisory instructions in its interactions with (the) regulator from time to time. We therefore request you to be guided by the press release of RBI dated January 31 and refrain from any further speculation.”
The development comes days after the RBI barred Paytm Payments Bank from offering any banking services, such as UPI facility and fund transfers post the deadline.
“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,” the central bank said in its order.
It also ordered the termination of the Nodal Accounts of One97 Communications and Paytm Payments Services by February 29.
The RBI attributed the move to Paytm Payments Bank’s “persistent non-compliances and continued material supervisory concerns”.
The diktat hit the fintech major hard. Following the RBI’s order on January 31, Paytm’s stock has been on a downward spiral and hit the lower circuit of 20% in two consecutive trading sessions on February 1 and 2. The stock ended at INR 487.05 on the BSE today.
Amid this sharp drop in share price, Morgan Stanley Asia (Singapore) bought Paytm shares worth INR 243.6 Cr via multiple open-market transactions on Friday (February 2), as per the NSE data. The financial services giant bought 50 Lakh shares, or 0.79% stake in the company, at INR 487.2 apiece.
Paytm Top Executives On The Frontlines
As the crisis loomed, the company’s founder and chief executive officer (CEO) took to X to assure users that the company will continue to work beyond February 29 despite the RBI directive.
Joining the bandwagon later was group chief finance officer (CFO) Madhur Deora who also issued a clarification in a bid to allay the jumpy retail investors.
Deora said there is an impression that Paytm and Paytm Payments Bank are one entity, which is not the case.
“There may be an impression that Paytm and Paytm Payment Bank is one, but by design and by structure, it is not and it cannot be,” said Deora.
He added that the payments bank’s operations are overseen by an independent management team and its matters are vetted by committees of Paytm’s board that comprises independent directors.
“First it is an associate company and second is not an associate company in the sense that it is (the) same Bank. And first and foremost, for a bank is that, it has to follow the governance that a bank is supposed to follow, which is to say that has to has its independent management team, which reports to the board and the matters that have to go to committees of the board where can only be independent directors,” the group CFO said.
Meanwhile, a day after the RBI’s order, the company’s top management tried to assuage the fear of investors and highlighted the steps the fintech giant would be taking over the next few weeks.
