Paytm Shares Tumble 8% After RBI Cancels Payments Bank Licence

Shares of One 97 Communications, the company behind Paytm, dropped sharply on Monday. The move came after the Reserve Bank of India (RBI) cancelled the licence of Paytm Payments Bank Ltd (PPBL). This effectively brings the bank’s operations to an end after years of regulatory action.

One 97 Communications Ltd shares slid nearly 8% in early trade to touch ₹1,057 on the National Stock Exchange (NSE), as the development triggered fresh concerns among investors about the fallout from the closure of its associate banking arm.

However, by 10:32 AM, it had recovered some losses but was still down 3.48% at ₹1,107.45.

Why Did RBI Take This Step?

The RBI said it had little reason to let the payments bank continue to exist. In its view, the bank failed to meet key regulatory conditions tied to its licence. The main problems identified by the RBI involved compliance issues, customer verification procedures, and standards of corporate governance.

Moreover, the regulator noted that the manner in which the institution had been managed did not serve the best interests of depositors or the general public. This conclusion follows a series of actions that began in 2022, when the RBI first imposed restrictions. By 2024, the bank had already been barred from taking fresh deposits or adding new customers.

With the latest move, the regulator has effectively drawn a line under the matter. It added that the bank holds enough funds to repay depositors during the winding-up process.

What Does Paytm Say About The Impact?

Paytm has tried to put distance between itself and the payments bank. In an exchange filing, it said there are no material business links with PPBL and no dependency on it for core services.

The company also pointed out that it had already written down its investment in the bank as of March 31, 2024. As a result, it does not expect any direct financial hit from the shutdown.

It further clarified that all its key services will continue as usual. This includes its app, UPI payments, QR code solutions, Soundbox devices, payment gateway, and wealth offerings.

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What Happens Next?

The board of PPBL has approved a plan to wind up the bank. The process will involve settling dues and formally closing operations over time.

For Paytm, the immediate task is to steady sentiment. While the payments bank chapter is now closing, the company’s broader fintech business remains active. The market response in the coming days will show whether investors are convinced by that separation.

Sources:

The Economic Times

NDTV