India’s central bank has extended the deadline for some business restrictions on Paytm’s Payments Bank to March 15 in “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 initially had set a deadline of February 29.
The extension follows curbs last month that wiped 55% from Paytm’s market cap, which floated in 2021 at a $20 billion valuation. The fintech serves over 15 million merchants and 330 million wallet customers. Its cash reserves stood at over $1 billion at the end of December.
The RBI said in a statement that it was extending the deadline in the “interest of customers (including merchants) of PPBL who may require a little more time to make alternative arrangements and the larger public interest.”
Bernstein analysts wrote in a note Friday evening that the new clarification means that Paytm’s Wallet (which has over 330 million customers) and FASTag products will cease to exist. Paytm led the FASTag market.
“There was no explicit exception provided for a bulk transfer of wallets/Fastag to another bank and hence these products will cease to exist — this was a largely expected negative,” Bernstein analysts added. (FASTag is India’s toll collection business.)
Many other payments bank’s services will be permitted until March 15 instead of the earlier February 29 deadline, the central bank said (PDF). The RBI also published an FAQ (PDF), detailing how the embargo on Paytm’s Payments Bank will impact merchant and customers. The central bank said merchants using Paytm’s QR code, soundbox and point-of-sale terminal devices will not be impacted by the disruption at Paytm, provided those machines and instruments are linked to other bank accounts.
“This is a major positive though we would have liked to see more details such as: What merchants need to do to continue using these payment solutions, if any (e.g. a re-KYC)? What Paytm needs to do to enable these payments and if it’s permitted to do so? (e.g. Switch over Nodal accounts, Partner with another bank as PSP etc.),” analysts at Bernstein wrote Friday in a note.
Last month the RBI ordered Paytm to close nodal accounts by February 29. It is maintaining this deadline — payments firms use such accounts to enable transactions. Paytm said Friday it has shifted its nodal account to Axis Bank.
“This arrangement is expected to seamlessly replace the nodal account that OCL was using with Paytm Payments Bank. Paytm Payment Services Ltd (PPSL), OCL’s wholly owned subsidiary has already been using the Axis Bank services, since its inception,” Paytm said.
Earlier this week, Macquarie slashed its Paytm price target to 275 rupees, or $4.11, over regulatory risks, sparking fears customers could exit. Shares closed Friday at 341 rupees.
The RBI has not disclosed Paytm’s violations, but said last week it only acts after “persistent non-compliance.” Governor Shaktikanta Das stated the bank engages bilaterally first to push corrective action. Any response is “proportionate to the gravity.”
Many hoped the RBI would soften its stance, but Friday’s update suggests it plans to proceed.
Story updated with Bernstein’s comment.
