As shares tank after RBI action, Paytm says it taking corrective steps
PPBL said it was “taking immediate steps to comply with RBI directions” including working with the regulator to address their concerns as quickly as possible
A day after the RBI barred Paytm Payments Bank Ltd (PPBL) from accepting deposits or top-ups, the shares of its parent company, One 97 Communications Ltd (OCL), crashed 20 per cent to Rs 608.80 on Thursday.
The Reserve Bank of India on Wednesday (January 31) barred PPBL from offering its core services including customer accounts and wallets from March, effectively crippling the company’s business.
Huge blow
PPBL is a part of one of India's largest payment firms Paytm. The action is technically not a cancellation of the licence of PPBL but it constricts the company’s operations to a great extent.
The huge blow to PPBL also covered FASTags and National Common Mobility Card (NCMC) among others. The RBI said its action came on top of “persistent non-compliances and material supervisory concerns”.
RBI curbs
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.
Bank promises action
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.
It said it expects this action to have a worst-case impact of Rs 300-500 crore on its annual earnings before interest, tax, depreciation and amortisation (EBITDA) going forward.
Other banks
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.
User deposits
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.
