On February 1, Paytm attempted to mitigate the fallout after the Reserve Bank of India (RBI) imposed significant business restrictions on Paytm Payments Bank (PBBL). The company informed the stock exchanges that, depending on the resolution’s nature, it anticipates a worst-case impact of Rs 300-500 crore on its annual EBITDA.
However, Paytm expressed optimism about improving profitability despite these challenges. The RBI’s action came after a validation report by external auditors revealed persistent non-compliances and ongoing material supervisory concerns within the Paytm Payments Bank.
In response to the RBI’s measures, Paytm stated that it is taking immediate steps to comply with the RBI’s directives and address concerns promptly. The central bank’s restrictions include ceasing deposits, credit transactions, or top-ups in customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc., after February 29, 2024, except for certain credits like interest, cashbacks, or refunds.
The RBI has also directed the termination of nodal accounts of One97 Communications and Paytm Payments Services by February 29, 2024. Paytm reassured users that the action against PBBL does not impact deposits in savings accounts, wallets, FASTags, and NCMC accounts, allowing them to use existing balances.
Paytm clarified its commitment to working only with other banks, excluding Paytm Payments Bank, moving forward. The Paytm Payment Gateway business for online merchants will continue its operations, while offline merchant payment network services like Paytm QR and Paytm Card Machine will remain unaffected.
Analysts anticipate a significant impact on Paytm’s stock prices, with institutional investors likely to sell over concerns of contagion affecting other key businesses. The company’s wallet business and Fastag GMV may be particularly affected, leading to a potential migration of customers to other market players. The impending repercussions could extend to the lending business, accounting for over 20% of revenues, if lending partners limit business due to operational and governance risks.
