The Reserve Bank of India (RBI) has taken decisive action against Paytm Payments Bank, announcing the prohibition of its wallet services effective February 29, 2024. This move comes in response to observed non-compliance and material supervisory concerns, following the recent ban on the issuance of new FASTags by the payments bank. It is noteworthy that this directive will not impact the utilization of savings and current account balances by customers, as clarified by the central bank. In addition to this measure, the RBI has also terminated the nodal accounts of Paytm's parent company, One97 Communications, and Paytm Payments Bank.
Impact on Paytm UPI Services
As of February 29, 2024, Paytm Payments Bank is restricted from providing the following services:
- Fund transfers
- Bharat Bill Payment Operating Unit
- UPI (Unified Payments Interface)
This sanction follows an earlier directive in March 2022, which prohibited the entity from acquiring new customers. The regulatory restriction encompasses:
- Customer accounts
- Prepaid instruments
- Wallets
- FASTags
- National Common Mobility Cards (NCMC)
RBI's Communication on the Matter
The RBI's letter explicitly prohibits Paytm from accepting:
- Deposits
- Credit transactions
- Top-ups
Furthermore, Paytm is directed to settle all transactions initiated on or before February 29, 2024, by March 15, 2024. However, customers are assured eligibility for:
- Refunds
- Cashbacks
- Interest credits
- Withdrawal or utilisation of account balance
Market Implications for Paytm Stock
The RBI's action against Paytm, strategically announced just a day before the Budget, is anticipated to have significant implications on the company's stock performance. As of the latest market data, Paytm's stock closed at Rs 761 per share on Wednesday, registering a minor decrease of 0.01% on the BSE. Over a 1-month period, the stock has seen a gain of 17.78%, while experiencing a 3.33% loss over a 6-month period. Notably, the company's stock has exhibited a growth of 45.27% over the past year.
Previous FASTag Ban and IHMC's Involvement
In a related development, the National Highways Authority of India (NHAI) arm, IHMC, recently imposed a ban on Paytm Payments Bank from issuing new FASTags due to non-compliance with service level agreements. IHMC additionally restricted the payment bank from acquiring new toll plazas. A show cause notice was issued to Paytm Payments Bank, questioning its non-cooperation with IHMC in compliance-related audits, raising the possibility of penal actions.
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