Paytm has been going through a tough time after RBI instructed Fintech to seize its Paytm payment bank services indefinitely. Paytm’s market value has dropped a whopping $2.5 billion in the last few days. Now, there are talks that the Central Bank of India might cancel the licence of Paytm Payment Bank after the March 15 deadline runs out. The RBI has directed Paytm to settle all its pipeline transactions and nodal accounts before March 15 and has also instructed that no further transactions shall take place. However, a final call on the cancellation will be taken in a few days to finalise the matter.
According to the RBI, this seems the most logical step forward considering the recent developments. What will this mean for Paytm? Well, for starters, Paytm won’t be able to make bank accounts or disburse loans. It will also be unable to issue FASTags and NCMC Cards.
Why Is Paytm In This Mess?
According to various reports, the major reason for RBI’s action against Paytm is the complete disregard for the regulatory standards and the compulsory compliance requirements. According to RBI, this action was taken to protect the financial system and prevent Paytm from being run in a manner that is detrimental to its user’s security and the interest of its depositors and stakeholders.
As per RBI, the fintech was not able to keep up with the regulatory requirements. The RBI found irregularities in the KYC process which posed a danger to account holders, depositors and wallet holders. This translates to the absence of KYC and PAN validation failure for hundreds of thousands of accounts. Moreover, RBI also found that multiple accounts and customers were linked to the same PAN card, sometimes as many as 1000 customers.
The regulatory authority also found that the total value of transactions reached crores, which is way beyond the regulatory limit in minimum KYC. This raises money-laundering concerns as, along with the value of transactions, RBI found a high number of dormant accounts as well. In short, Paytm had little to no knowledge of the accounts they have as many accounts were also closed by law enforcement authorities as they were being used to commit digital frauds.
What’s Next For Paytm
After the news of Paytm seizing its banking operations, Paytm’s share price fell 36% in 2 days. It went from Rs. 761 on January 31 to Rs. 487 on February 2. As of February 8, the share price of Paytm is at Rs. 468, while the lowest price in February was Rs. 450.
Moreover, this news will have severe effects on the public image of Paytm. Some of the biggest users of Paytm are businesses and after these events, more and more people are looking to opt for other fintech options in the market. For now, Paytm’s future is quite unclear and the coming days will reveal what the future of Paytm holds. The CEO of Paytm, Vijay Shekhar Sharma also held a meeting with the Finance Minister of India, Nirmala Sitaraman, however, the details of the meetings are still not out.
