Son of a schoolteacher from Aligarh district in Uttar Pradesh, Vijay Shekhar Sharma was enamoured by Jack Ma-run Alibaba’s deal with smartphones moderately than desktop computer systems, when he constructed a digital funds firm that will let Indians pay for greens, pay utility payments or purchase cinema tickets utilizing their cellphones.
Mr. Sharma, the poster boy of India’s fintech increase, additionally got down to construct an Alipay-like cell market to go alongside the funds enterprise, permitting companies to promote items from matchbox to iPhones on-line.
With fame got here a set of controversies for arguably probably the most high-profile of a wave of Indian tech entrepreneurs. But none just like the one now. The present disaster the place the Reserve Bank of India (RBI) has ordered Paytm Payments Bank to halt most of its enterprise, is an existential one.
Here is a breakdown of Paytm Payments Bank disaster
What was the latest RBI motion towards Paytm Payments financial institution all about?
The RBI final week ordered Paytm Payments Bank Ltd, a restricted financial institution that may take deposits however can’t lend, to not take any additional deposits or conduct credit score transactions or perform top-ups on any prospects accounts, pay as you go devices, wallets, playing cards for paying highway tolls after February 29.
Paytm Wallet prospects can use cash until the time their stability is exhausted. They can’t add cash after February 29. And in case the RBI doesn’t relent, top-up for Paytm Wallet will cease and transactions by way of it could not will be carried.
What is Paytm Payments Bank, and who owns it?
Paytm Payments Bank Limited (PPBL) is an affiliate of One97 Communications Limited (OCL). One97 Communications holds 49% of the paid-up share capital (instantly and thru its subsidiary) of PPBL. Mr. Sharma has a 51% stake within the financial institution.
PPBL commenced operations as a funds financial institution with impact from May 23, 2017. The financial institution provided digital banking, together with financial savings accounts, present accounts, mounted deposits with accomplice banks, and stability in wallets, UPI, and FASTag, amongst different companies.
Paytm Wallet, which comes below PPBL, leads the section. As per the RBI’s provisional knowledge for December 2023, Paytm Wallet customers carried out 24.72 crore transactions value over ₹8,000 crore for buy of products and companies whereas 2.07 crore transactions had been carried out for transferring over ₹5,900 crore.
What occurred and what it means for patrons?
The RBI directed the Paytm Payments Bank to cease accepting deposits or top-ups in buyer accounts, wallets, FASTags and different devices after February 29 on January 31. Withdrawal or utilisation of balances by its prospects from their accounts, together with financial savings financial institution accounts, present accounts, pay as you go devices, FASTags, National Common Mobility Cards, are to be permitted with none restrictions, as much as their out there stability.
Paytm Wallet customers can proceed to hold on transactions until February 29. However, after February 29, they are going to be capable to use their current stability until the time it’s exhausted however not add any cash to their account.
The similar rule is relevant on PPBL accounts, Paytm Wallet-linked companies like FASTag, National Common Mobility Card which might be used for journey in metro and different public transport.
What are the alternate options for customers?
There are over 20 banks and non-banking entities that supply pockets service like Mobikwik, PhonePe, SBI, ICICI Bank, HDFC, Amazon Pay and many others.
Similarly, there are 37 banks comprising all of the recognized private and non-private sector banks like SBI, HDFC, ICICI, IDFC, Airtel Payments Bank that are authorised to supply FASTag. Customers can recharge FASTag on-line utilizing their banks cell banking, web banking or third social gathering apps like Google Pay, PhonePe and many others.
Why did Paytm Payments Bank come below RBI lens?
The banking regulator had been regularly flagging off points. According to sources, cash laundering issues and questionable dealings of tons of of crores of rupees between standard pockets Paytm and its lesser-known banking arm had led RBI to clamp down on entities run by Mr. Sharma.
Sources additional stated that PPBL had lakhs of non-KYC (Know Your Customer) compliant accounts and in hundreds of circumstances single PANs had been used for opening a number of accounts. There had been cases of the full worth of transactions — operating into crores, a lot past regulatory limits in minimal KYC pre-paid devices elevating cash laundering issues, sources stated.
What has been the corporate’s response to the RBI’s Jan 31 motion?
While customers have the choice to change to different wallets, and FASTag companies and many others being supplied by different distributors, Paytm administration has stated that PPBL is in dialogue with the RBI to adjust to their route for persevering with the enterprise.
Paytm has stated that its monetary companies reminiscent of mortgage distribution, insurance coverage distribution and fairness broking aren’t in any means associated to PPBL and are anticipated to be unaffected. The firm’s offline service provider fee community choices like Paytm QR, Paytm Soundbox, Paytm Card Machine will proceed as regular, the place it might probably onboard new offline retailers as properly.
Paytm sees an affect of ₹300-500 crore on its annual operational revenue.
How has One97 Communications’ shares responded?
Following the RBI’s crackdown, shares of One97 Communications Ltd, which owns Paytm model, slumped 40% within the final two days. The inventory tanked 20% to ₹487.05, its lowest buying and selling permissible restrict for the day, on the BSE on Feb. 2. In two days, the corporate’s market capitalisation eroded by ₹17,378.41 crore ₹Rs 30,931.59 crore.
