Paytm CEO Shekar Sharma met Finance Minister Nirmala Sitaraman
On 6th February, Paytm CEO Vijay Shekhar Sharma met Finance Minister Nirmala Sitharaman in order to seek help regarding the Reserve Bank of India (RBI) actions against his Paytm Payments Bank.
Paytm crashes 40% in the last two days. On 2nd February, stock was trading at Rs 487.2 which is 20% low from 1st February's close. The company lost $2.1 billion in market cap in a span of just two days. This happens after Reserve Bank of India (RBI) barred Paytm payments Bank from performing banking services from 29th February. So the bank will not be able to accept deposits or give credits to its customers. Only withdrawals are permitted after 29th February.
The stock crash came after Reserve Bank of India (RBI) on 31st January issued a statement to impose restrictions on Paytm payment banks. It said that the payments Bank will be barred from giving banking services to its customers. The decision is retaliation to the system audit report and subsequent validation report conducted by external auditors.
According to the report, there was persistent non compliance and continued material supervisory concerns the bank. KYC measures were not taken and regular related party transactions with other Paytm group companies were also an issue. The Central Bank directed that Nodal accounts of Parent company One97 Communications and Paytm be terminated. This company has been facing issues with the regulator from a long run as per the report. On the 22nd March, RBI barred Bank from on boarding new customers with immediate effect and this order is still in force. Paytm controls around 13% of Market share in India. Paytm has 500 million customers in India and has opened 30 million bank accounts. Withdrawal of funds and services like fund transfer, bill payments and UPI payments is allowed.
Jefferies downgraded ratings on stock to underperform with a target price of Rs 500. Motilal Oswal has also downgraded Paytm to neutral and reduced the target price to Rs. 575. Macquarie has said that the ban is quite serious and will hamper Paytm's ability to retain customers.
On 2nd February, CEO of Paytm posted on X, "To every Paytmer, Your favourite app is working, will keep working beyond 29 February as usual. I with every Paytm team member salute you for your relentless support. For every challenge, there is a solution and we are sincerely committed to serve our nation in full compliance. India will keep winning global accolades in payment innovation and inclusion in financial services - with PaytmKaro as the biggest champion of it."
"Neither the Company nor its founder and CEO are being investigated by the Enforcement Directorate regarding inter alia money laundering. In the past, certain merchants/users on our platforms have been subject to enquiries and on those occasions, we have always cooperated with the authorities," Paytm said in a regulatory filing. "We would like to set the record straight and deny any involvement in anti-money laundering activities. We have and continue to abide by Indian laws and take regulatory orders with utmost seriousness," the filing said.
