Paytm stock crashes for second day on RBI order, CEO seeks to reassure
INDIAN digital payments firm Paytm saw its shares plunge by its daily limit of 20 per cent for a second straight day after the central bank ordered its banking arm to stop taking fresh deposits.
The Reserve Bank of India (RBI) said the action was taken due to Paytm’s non-compliance with rules and supervisory concerns, which a source said had stretched over years.
Paytm Payments Bank powers most features on one of India’s most popular digital payments apps that competes with the likes of Walmart’s PhonePe and Google, allowing users to transfer funds, pay bills and maintain a digital wallet for retail payments.
Come Mar 1, the RBI has said, the bank will be prohibited from further deposits, credit transactions or wallet uploads. No fund transfers will be allowed either, which means that unless Paytm finds a new banking partner or partners, it will not be able to offer most services on its app.
CEO Vijay Shekhar Sharma said on Thursday (Feb 1), however, that partnerships with banks would “not be difficult to execute”.
Since the RBI’s order on Wednesday, Paytm shares have lost 36 per cent and were trading at 487.2 rupees on Friday morning, near record lows marked in 2022, and valuing the company at US$3.7 billion.
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Sharma took to social media to reassure users.
“Your favourite app is working, will keep working beyond Feb 29 as usual,” he said in a post on X.
“For every challenge, there is a solution and we are sincerely committed to serve our nation in full compliance,” Sharma added.
On Thursday, Bhavesh Gupta, president and chief operating officer of Paytm, said on a call that Paytm expects to get back to normalcy by March, “if not earlier”.
He added that the company had been holding discussions with the RBI and those have been on the “positive side”.
Kranthi Bathini, director of equity strategy at WealthMills Securities, said while the impact of the order would be huge in the short-term for Paytm which “barely makes a profit”, in the long run, it could improve.
“Paytm is a leading digital payments firm in the country with a wide reach both in urban as well as rural space which would help it,” he said.
Paytm has a long history of being in hot water.
Last year, the central bank imposed a penalty of US$650,000 on Paytm Payments Bank for non-compliance with some provisions, including “know your customer” directions. In 2022, the central bank barred it from taking on new customers and ordered a comprehensive audit of its IT systems.
That move came months after Paytm saw a dramatically underwhelming stock market listing amid concerns about the company’s valuation, its complex business model and slow road to profitability. REUTERS
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