Update on Paytm Bank/Paytm:
RBI has now completed the audit of Paytm Payment Bank and has found the bank in gross non-compliance , warranting further strict supervisory action.
Paytm Payment Bank cannot take any further deposits, or wallet top-ups or undertake any PPI business.
Notably, earlier, RBI had suspended new wallet onboarding, but now it has suspended top-ups in the existing wallets operated by Paytm, which should impact Paytm’s existing customers and so also Paytm’s revenue particularly given higher MDR on wallet business.
Customers will be allowed to withdraw or utilise their a/c balances without any restrictions, upto their available balance. Once the balance is over, the customer will not be able to transact.
Bank has also been disallowed to offer any BBPOU and UPI facility after Feb 29, 2024. Need to check, if this will have any impact of Paytm’s business.
Our view: We believe that the suspension or virtual closure of Paytm Payment Bank will have impact on Paytm’s wallet business (which Paytm should have diversified long back) and some business operations (including UPI) as being one of the transactional bank for Paytm. Separately, Vijay Shekhar Sharma (MD & CEO) holds 51% stake in Paytm Payment Bank, while Paytm holds (One 97 Communications) 49% and thus could again amplify reputational and governance risk in the group. Additionally, Paytm has consciously slowed down its BNPL/PL business, which could prolong its journey to healthy and sustained profitability. Currently, we do not have rating on the stock. We will come back with more update post speaking to the management.
