Paytm shares slump after RBI bars payments bank from signing up new customers

[BENGALURU] Shares of Indian digital payments firm Paytm, formally known as One97 Communications, tumbled more than 13 per cent on Monday (Mar 14), after the central bank barred the company's payments bank from taking on new customers and ordered an audit of its IT systems.

The Reserve Bank of India (RBI) said on Friday it would allow Paytm Payments Bank to take on new customers subject to specific permission after reviewing the IT auditor's report.

Paytm Payments Bank had received the central bank's approval in December to function as a scheduled payments bank, helping it expand its financial services operations.

Paytm made its debut in November last year in the country's biggest initial public offering. But the listing was also one of the worst witnessed by the Indian stock market. Including Monday's losses, Paytm shares have fallen more than 65 per cent since their debut.

Analysts at ICICI Securities said the digital payments startup would have to increase its efforts to enhance engagement with the existing user base to offset any adverse impact of the embargo on new users.

"Now, expecting moderation in onboarding of new users and the adverse impact on incremental payment revenue... we revise our target price to 1,285 rupees (earlier 1,352 rupees)," the research firm said, adding that it might defer the company's plan to apply for a conversion into a small finance bank.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Analysts at Macquarie Research expect a significant impact on Paytm's brand and customer loyalty. They said the recent developments would substantially lower the chance of Paytm Payments Bank of upgrading to a small finance bank.

Business news website Moneycontrol had reported last week that Paytm Payments Bank was likely to apply to the RBI for a small finance bank licence by June, when it completes 5 years of operations. REUTERS