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  1. Paytm crisis: RBI’s action & what's next | RBI Paytm Payments bank | Is Paytm shutting down?

Paytm crisis: RBI’s action & what's next | RBI Paytm Payments bank | Is Paytm shutting down?

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2 min read • Updated: February 3, 2024, 1:14 PM

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Summary

Are you a Paytm user, a shareholder of One 97 Communications, or a customer of Paytm Payments Bank? The recent 20% fall in Paytm's shares and another 20% crash have left everyone wondering - What's next for this leading fintech company?

🏦 RBI Cracks the Whip on Paytm Subsidiary Firstly, let's understand what exactly happened. On January 31, 2024, the Reserve Bank of India (RBI) issued an order stating that starting March, Paytm Payments Bank, a subsidiary of Paytm, will no longer accept deposits in its accounts or wallets. Essentially, Paytm Payments Bank will have to cease all banking services from March.

🔍 What is Paytm Payments Bank? Before delving into why RBI made this decision, let's briefly explain what Paytm Payments Bank is.

  • Paytm Payments Bank is a specialised banking entity licensed in 2015 and operational since November 2017.
  • It can accept small deposits up to two lakh rupees but is restricted from providing loans like traditional banks.
  • Paytm owns 49% of Paytm Payments Bank, and the founder, Vijay Shekhar Sharma, owns the remaining 51%.

📉 Supervisory Concerns and Non-Compliances Led to RBI’s Order RBI's action is a result of persistent non-compliance and several supervisory concerns related to Paytm Payments Bank. The specifics of these concerns and lapses were not disclosed by RBI, but it follows a series of warnings over the past two years.

📊 Impact on Paytm's Financials The impact is significant. Paytm Payments Bank holds custody of 33 crore wallet accounts, contributing approximately 30% to Paytm's consolidated revenue. In FY23, Paytm Payments Bank's revenue stood at ₹2,356 crore out of Paytm's total revenue of ₹6,028 crore.

💸 Paytm Fears ₹3-5 Billion Impact on EBITDA Post the subsidiary's shutdown, Paytm anticipates a substantial impact on its EBITDA, ranging between ₹3-5 billion in the worst-case scenario.

📜 Paytm Assures Steps to Follow RBI’s Directions Paytm has assured that it will promptly follow RBI's directions. It plans to cease operations with Paytm Payments Bank and work exclusively with other banks, adhering to regulatory requirements.

🔔 Paytm App Continues Post Paytm Payments Bank Shutdown It's essential to clarify that the Paytm app itself is not shutting down. Founder Vijay Shekhar Sharma confirmed via a tweet on February 2 that the Paytm app will continue its usual operations even after February 29.