Paytm Bank in crisis: The Reserve Bank of India on Jan 31 ordered Paytm Payments Bank for not onboarding new customers after Feb 29. And also asked to not take any further deposits conduct credit transactions or carry out top-ups on any customer's accounts, prepaid instruments, wallets, or cards for paying road tolls after February 29. However, no restrictions were imposed on the current consumers who can use money till the time their balance is exhausted. They cannot add money after February 29.

Revenue Secretary Sanjay Malhotra said that the Enforce Directorate may open an investigation into the Paytm Payment Bank matter if new allegations of money laundering are found.

What is Paytm Payments Bank, and who owns it?

Paytm Payments Bank Limited (PPBL) is an associate of One97 Communications Limited (OCL). One97 Communications holds 49 per cent of the paid-up share capital (directly and through its subsidiary) of PPBL. Vijay Shekhar Sharma has a 51 per cent stake in the bank.

PPBL commenced operations as a payments bank with effect from May 23, 2017. Paytm Payments Bank offers digital banking, including savings accounts, current accounts, fixed deposits with partner banks, and balance in wallets, UPI, and FASTag, among other services.

Paytm Wallet, which comes under PPBL, leads the segment. As per RBI's provisional data for December 2023, Paytm Wallet users carried out 24.72 crore transactions worth over Rs 8,000 crore for the purchase of goods and services while 2.07 crore transactions were carried out for transferring over Rs 5,900 crore.

Why did Paytm Payments Bank come under the RBI lens?

The banking regulator had been frequently flagging off issues.

According to sources, money laundering concerns and questionable dealings of hundreds of crores of rupees between popular wallet Paytm and its lesser-known banking arm had led the Reserve Bank of India to clamp down on Vijay Shekhar Sharma-run entities.

Sources further said that PPBL had lakhs of non-KYC (Know Your Customer) compliant accounts and in thousands of cases single PANs were used for opening multiple accounts. There were instances of the total value of transactions -- running into crores of rupees, much beyond regulatory limits in minimum KYC pre-paid instruments raising money laundering concerns, sources said.

What has been the company's response to the RBI's Jan 31 action? While users have the option to switch to other wallets, and FASTag services etc being provided by other vendors, Paytm management has said that PPBL is in discussion with RBI to comply with their direction for continuing the business.

Paytm has said that its financial services such as loan distribution, insurance distribution and equity broking are not in any way related to PPBL and are expected to be unaffected.

Paytm sees an impact of Rs 300-500 crore on its annual operational profit. In two days, the company's market capitalisation (mcap) eroded by Rs 17,378.41 crore to Rs 30,931.59 crore.

With PTI inputs

The banking regulator had been frequently flagging off issues.

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