India’s central bank has extended the deadline for some business restrictions on Paytm’s Payments Bank to March 15 in the “larger public interest”, dashing hopes of any major concessions but allowing extra time to comply.
The Reserve Bank of India (RBI) said on Friday that Paytm Payments Bank will be barred from accepting deposits and facilitating credit transactions from March 15. The order had originally set a deadline of February 29.
The expansion follows restrictions last month that wiped 55% off Paytm’s market cap, which was pegged in 2021 at a $20 billion valuation. The fintech serves over 15 million merchants and 330 million wallet customers. Its cash reserves were over $1 billion at the end of December.
The RBI said in a statement that it is extending the deadline in “the interest of customers (including merchants) of PPBL who may need some more time to make alternative arrangements and the larger public interest.”
Bernstein analysts wrote in a note on Friday night that the new clarification means Paytm’s Wallet (which has over 330 million customers) and FASTag products will cease to exist. Paytm led the FASTag market.
“There was no express exemption provided for a bulk transfer of wallets/Fastag to another bank and therefore these products will cease to exist — this was a largely expected negative,” Bernstein analysts added. (FASTag is India’s toll collection company.)
Many other payment bank services will be allowed by March 15 instead of the previous deadline of February 29, according to the central bank he said (PDF). The RBI too posted a FAQ (PDF), detailing how the embargo on Paytm’s Payments Bank will affect merchant and customers. The central bank said merchants using Paytm’s QR code, soundbox and terminals will not be affected by the Paytm shutdown provided these machines and instruments are linked to other bank accounts.
“This is a major positive although we would like to see more details such as: What do merchants need to do to continue using these payment solutions, if any (eg re-KYC)? What should Paytm do to enable these payments and if it is allowed? (eg switching Nodal accounts, Partnering with another bank as PSP etc.),” Bernstein analysts wrote in a note on Friday.
Last month, the RBI ordered Paytm to close the hub accounts by February 29. It maintains this deadline — payment companies use such accounts to enable transactions. Paytm on Friday announced that it has shifted its hub account to Axis Bank.
“This agreement is expected to seamlessly replace the hub account used by OCL with Paytm Payments Bank. Paytm Payment Services Ltd (PPSL), the wholly-owned subsidiary of OCL has already been using Axis Bank’s services since its inception,” Paytm said.
Earlier this week, Macquarie cut its Paytm price target to 275 rupees, or $4.11, due to regulatory risks, sparking fears that customers could walk away. The shares closed on Friday at 341 rupees.
The RBI has not disclosed Paytm’s violations but said last week that it acts only after “persistent non-compliance”. Governor Shaktikanta Das said the bank is making a bilateral commitment first to push for remedial measures. Any answer is “commensurate with gravity”.
Many had hoped the RBI would soften its stance, but Friday’s update suggests it plans to go ahead.
The story has been updated with Bernstein’s comment.
