RBI Bars Paytm Payments Bank From Offering Services Effective March 2024

Paytm Payments Bank has been asked by the Reserve Bank of India to stop accepting any form of deposits and making new transactions from February 29, 2024. The Reserve Bank of India has issued freeze orders to many different banks for a few days now.  Paytm Payments Bank is also one of the banks that have suspended transactions. Paytm Payments Bank used to accept deposits in their wallets. But now RBI has put strict restrictions on it. The RBI has been ordering suspension of operations against many private banks and corporate banking institutions in the country due to misconduct or other reasons.

From February 29, 2024 onwards, any facility under Paytm Payment Bank will not be considered legal, as RBI itself has stepped in and stopped all transactions. Under Paytm Bank, different services were offered like prepade, FAStags, NCMC type of cards etc. No deposits and credit card and top up of any kind will be allowed. On 11 March 2022, Reserve Bank of India ordered Paytm Payments Bank to stop transactions from new customers.

Yogesh Dayal, Chief General Manager of Central Bank, has given detailed information about this step to some newspapers.

The Massive Trickle-Down Effect Will Come

One97 Communications, which is the parent company of Paytm, will have a huge impact.  This will have a huge impact on all the people who are various partners in this company as well as the working class.  Following this step by RBI, Paytm said that they will take early steps in that direction by strictly complying with RBI’s instructions and orders. A bad impact is expected in the form of interest tax depreciation and loan waiver as well as annual revenue of Rs 5 billion in the company.

How will This Event Affect The Consumer And Merchant?

From February 29 onwards, Paytm Payments Bank will not be able to onboard customers.  This simply means that even if you are not currently using this platform and want to invest here after February 29, you cannot do so. As for existing users, they will not be able to use their Paytm Wallet as well as Paytm FAStag and other related services. According to the announcement made by the Reserve Bank of India, investors can withdraw from Paytm Payments Bank at any time.

The company said in a press conference that the “Paytm Payment Gateway Business” will continue to serve its existing merchant customers, especially since the company has a maximum number of merchants aligned with it.  The company also said that OCL services like Paytm QR Code, Paytm Sound Box and Paytm Card Machine will continue as usual through which the company can onboard online merchants.

There Will Be A Big Impact On The Stock Market

Be it any banking sector or any other company when something positive or negative happens in it, it directly affects the market value of the company. Paytm is a leading company in India. After the RBI’s recent announcement regarding Paytm Payment Bank, investors have started to pull out. Investors have shown an inability to stay where losses are logically visible.

Capital markets firm Jefferies has downgraded Paytm’s stock to “underperform” by doubling its rating following the RBI’s decision.  Their target price has come down from Rs 1050 to around Rs 500. Paytm’s business impact will be primarily driven by reputational concerns arising from governance and compliance.  It has also been said through this medium.

How Will This Affect The Growing Fintech Sector?

Paytm is considered as one of the biggest players in the fintech sector across the country.  This step taken by RBI regarding Paytm Payment Bank has certainly given a big shock to the ecosystem. Ecosystem experts are expressing considerable concern as to how this could be the biggest threat to the ecosystem.  Ashneer Grover, former MD of Bharatpe, said in a statement that the RBI’s move is for all Fintech companies.

Ashneer Grover also said that this kind of decision will pose a considerable threat to the sector. He said that I don’t understand RBI and RBI’s policy, but this decision taken by them shows that fintech sector can be completely destroyed with time. IIMs and IITs, the main generators of market cap and employment over the last decade, are now seen struggling to get places. As a country we certainly cannot afford this.

Earlier KYC Action On Paytm Payments Bank

This is not the first time that Paytm Payments Bank has faced action from the RBI. Even before this RBI has taken action against Paytm Payment Bank under the rules. Earlier, as Paytm Payment Bank did not perform kyc as per RBI rules, RBI issued the order and immediately took action against Paytm Payment Bank. KYC is mandatory for all banks as per RBI rules. Action was taken against Paytm for this reason already 3 months ago.

Reserve Bank of India not only took action against Paytm Payments Bank but also slapped a huge fine on Paytm Payments Bank.  A huge penalty of Rs 5.39 crore was imposed on Paytm Payments Bank by the RBI.

Even in 2021, RBI had imposed a fine of Rs 1 crore on Paytm Payment Bank, even at that time it was said that Paytm Payment Bank had imposed this penalty on them for violating some rules.

Paytm Payments Bank New Customer Registration Closed

After the RBI’s action, it is understood that Paytm Payment Bank is no longer safe to serve new customers in any form.  As the leading company in the country, most of the people trusted Paytm Payment Bank and therefore, the merchants have invested a lot under this company.  Now, after February 29, Paytm Payment Bank will not be able to add new customers or provide any services in any form.

What Will Happen Next For Paytm Payment Bank?

At least for now, the RBI’s decision regarding Paytm Payment Bank has had repercussions.  There may be more charges against Paytm Payments Bank in the future or Paytm Payments Bank may file a petition in court to defend itself. RBI conducts thorough monitoring and study before taking any action so it is very unlikely that Paytm Payment Bank will take any action against RBI. It will be worth seeing what turn this incident will take in the coming days.

Conclusion

In the above information, we have seen the complete information regarding how RBI took a decision regarding Paytm Payment Bank. Any bank has to be subordinated to the central bank of the country and those banks can function only under it. The Reserve Bank of India, the premier and national bank of our country, regulates all the banks. If the bank does not act as per RBI regulations, RBI takes action against the bank. RBI’s actions are aimed at transparent transactions and fairness to all.