Summarize

Simplifying... Inshort

Following the Reserve Bank of India's (RBI) crackdown, Paytm's parent company, One97 Communications Ltd. (OCL), is shifting its focus to partnerships with other banks, distancing itself from Paytm Payments Bank Limited.
This move has led to a 20% drop in Paytm's shares and a downgrade in its rating by brokerage firm Jefferies.
Despite these changes, Paytm's QR payment services and merchant offerings will continue to operate as usual.

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Paytm's shares have fallen by as much as 20% as the stock market opened today

RBI's crackdown on Paytm Bank raises concerns of license revocation

By Pratyaksh Srivastava

Feb 01, 2024

10:33 am

What's the story

There seems to be no end to bad news for Paytm Payments Bank Limited (PPBL). Yesterday, the Reserve Bank of India (RBI) denied it from accepting new deposits, top-ups, or credit transactions after February 29, due to ongoing non-compliance issues and major supervisory concerns. Now, NDTV Profit has reported that the crackdown could be a sign that the bank's license may be revoked in the future. The RBI is reportedly waiting to ascertain the impact of such a licence cancellation.

Paytm's reaction

Going forward, OCL will not work with Paytm Payments Bank

PPBL is working with the RBI to address compliance requirements. In the meantime, PPBL's parent company, One97 Communications Ltd. (OCL), is scrambling to partner with other banks. "Going forward, OCL will be working only with other banks, and not with Paytm Payments Bank Limited," the company said. "The next phase of OCL's journey is to continue to expand its payments and financial services business, only in partnerships with other banks." OCL trades as Paytm at the stock market.

The aftermath

Brokerage firm downgrades Paytm's ratings as stocks fall

In the aftermath of the RBI's curbs, Paytm's shares have fallen by as much as 20% today. At the time of writing, the shares were trading at Rs. 609, which marks a fall into the lower circut with a decline of 19.99% since yesterday. But that's not all. Brokerage firm Jefferies has downgraded Paytm from 'buy' to 'underperform' and reduced the target price of stocks to Rs. 500.

No impact on payment services

Paytm's QR payment services to remain operational

In a regulatory notice, Paytm said that its "Paytm Payment Gateway business (online merchants) will continue to offer payment solutions to its existing merchants." "OCL's offline merchant payment network offerings like Paytm QR, Paytm Soundbox, Paytm Card Machine, will continue as usual, where it can onboard new offline merchants as well." Due to termination of nodal account of OCL and Paytm Payments Services Limited (PPSL) by February 29, OCL and PPSL will move the nodal account to other banks.