As shares tank after RBI action, PPBL says business will go on
PPBL said it was “taking immediate steps to comply with RBI directions” including working with the regulator to address concerns as quickly as possible
A day after the Reserve Bank of India (RBI) barred Paytm Payments Bank Ltd (PPBL) from accepting deposits or top-ups, the company assured clients on Thursday (February 1) that it was taking corrective steps even as the shares of its parent firm, One 97 Communications Ltd or OCL, crashed 20 per cent to ₹608.80.
What RBI said?
The RBI on Wednesday (January 31) barred PPBL from offering its core services including customer accounts and wallets from March, effectively crippling the company’s business.
The huge blow to PPBL also covered FASTags and National Common Mobility Card among others. The RBI action came on top of “persistent non-compliances and material supervisory concerns”.
The action is technically not a cancellation of the licence of PPBL, but it constricts the company’s operations to a great extent. The PPBL is a part of one of India’s payments firm Paytm.
What PPBL can’t do?
The regulator told PPBL that it will not be able to take fresh deposits, facilitate credit transactions or offer fund transfers including the Unified Payments Interface (UPI) facility after February 29.
"No further deposits or credit transactions or top ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime," a RBI statement said.
The PPBL said on Thursday that it was “taking immediate steps to comply with RBI directions” including working with the regulator to address their concerns as quickly as possible.
How will RBI mandate affect PPBL?
The PPBL said it expects the RBI action to have a worst-case impact of ₹300-500 crore on its annual earnings before interest, tax, depreciation and amortisation (EBITDA) going forward.
However, the company said it expects to "continue on its trajectory" to improve its profitability. Also, OCL will be working only with other banks and not with PPBL, it said in an exchange filing.
Will user deposits be hit?
The company made it clear that the RBI action won’t impact user deposits in their savings accounts, wallets, FASTags and NCMC accounts, where they can continue to use the existing balances.
Paytm said its founder Vijay Shekhar Sharma had reconfirmed that he has not taken any margin loans or otherwise pledged any shares directly or indirectly owned by him.
Paytm, once seen as the poster boy of India’s fintech revolution, has more than 100 million know your customer (KYC) verified customers.