Paytm’s partner Paytm Payments Bank faces a tough outlook as it grapples with regulatory restrictions, leading to concerns about its survival. The current outlook for the bank appears bleak, but there remains a glimmer of hope to persuade regulators through improved enforcement to potentially ease some restrictions.
However, any potential sale or acquisition would be subject to the discretion and approval of the Reserve Bank of India (RBI). Paytm Payments Bank has faced challenges, including a two-year ban on onboarding new business customers and recent restrictions preventing acceptance of deposits and credit transactions since March 15.
The limitations
The imposed restrictions have implications for Paytm’s services, including the popular Paytm Wallet with around 330 million users, as well as the widely used FASTag. The latter, which has 2.5 million users, along with 6 crore Paytm wallet users for daily payments and 7 lakh NCMC users for travel purposes, will be affected by the restrictions effective March 15.
As Paytm tries to address the identified malfunctions and violations pointed out by the RBI, it is seeking clarity on the reasons behind the strict regulatory action. Paytm may not have had adequate time to thoroughly review the complete audit report detailing the payments bank’s violations, leading to the regulatory crackdown.
Paytm has been under regulatory scrutiny since its inception in 2017, facing repeated censures for various issues, including KYC violations and exceeding minimum transaction limits in prepaid instruments. The ongoing engagements with the RBI involved Paytm’s responses to address observed violations, but challenges continue.