Paytm Chronicle Continues: From FAQs to RBI’s Firm Stand, What We Know So Far

Paytm Expects Worst Case Impact Of Rs 300-500 Cr On Annual Operational Profit After RBI Order
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On Monday, Reserve Bank of India Governor Shaktikanta Das said there was “hardly any room” to review the action taken against Paytm Payments Bank. He also said that RBI takes action against regulated entities only after a comprehensive assessment.

While emphasising that RBI is supportive of the fintech sector, Das said it is also committed to protecting the interest of customers as well as ensuring financial stability.

Also Read: Paytm Shares Tank 9% After Macquarie Slashes Target Price By 57%; Know Target Price

Paytm FAQs

To address various issues of customers of beleaguered Paytm Payments Bank (PPBL), the Reserve Bank will issue a set of FAQs (Frequently Asked Questions) this week.

“Wait for FAQ that will have a set of clarifications related to customers of PPBL as our priority is customers should not be inconvenienced. Customer interest and depositors interest is uppermost for us,” Das said after the Finance Minister’s customary address to the central bank’s board.

In a major action against PPBL, RBI, on January 31, directed it to stop accepting deposits or top-ups in any customer accounts, wallets, FASTags and other instruments after February 29.

Asked if the deadline of February 29 would be extended, Das said, “Wait for the FAQ.”

“Don’t expect review of RBI’s decision in FAQ. FAQ will address issues related with depositors, customers, wallet users, FASTag holders. Whatever is in the customers’ interest that we are dealing in FAQ,” he said.

Persistent Non-compliance

Persistent non-compliance by Paytm with the regulatory guidelines despite nudges over some time ultimately led to stern action against the fintech, the RBI said and also made it clear that there are no systemic worries.

Without disclosing specific details of what led to the action against the fintech,  Das had made it clear that Paytm’s lack of regulation compliance does not pose a systemic threat.

“There is no worry about the system at the moment. Here we are talking about a specific institution, a specific payment bank,” Das had said after the MPC announcements last week.

Das said it starts with “nudges” from the regulator for corrective action and sometimes the RBI may give more than sufficient time to an entity to comply, and it is lack of compliance that ultimately leads to the business restrictions order.

The proportionality aspect is taken into consideration before imposing any restriction, Das said, adding, “All our actions are in the best interest of systemic stability and protection of depositors or customers’ interest.

“These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success.”

Paytm App Not Impacted

RBI said that the regulatory action is against Paytm Payment Bank Ltd and the Paytm App will not be impacted by it.

“Just one clarification, this particular action is against Paytm Payments Bank and is not to be confused with Paytm App…App is not impacted by this action,” RBI Deputy Governor Swaminathan J said in the media interaction after the bi-monthly MPC meeting.

Asked if banks can partner with Paytm wallet, he said it is a business decision and they have to carry out required due diligence as per their board-approved policy.

“I am sure they will carry out due diligence if they have got to do a partnership,” he said.

When asked about the decision to impose the rather strong action of business restrictions, without going for other alternatives like appointing a director on the board as it has done in some cases in the recent past, Swaminathan said a “one size fits all kind of solution may not work in such situations.”

Paytm App Operational

Commenting on RBI’s clarification, a Paytm spokesperson said, “We assure our users and merchant partners that the Paytm app remains fully operational, and our services are unaffected.”

Paytm continues to lead in mobile payments innovation and the company is eager to enhance service offerings through partnerships with various banks, the spokesperson said.

“We assure our merchant partners that Paytm QR, Soundbox and card machines will continue to work as always. Our dedication to providing seamless payment solutions and promoting financial inclusion across India remains as strong as ever,” a spokesperson added.

Not Received Approval For Downstream Investment In Paytm Payment Services

One97 Communications on Monday said it has not received government approval for downstream investment in payment aggregator subsidiary Paytm Payment Services Ltd.

In November 2020, PPSL applied for a licence with the RBI to operate as a payment aggregator under the guidelines on Regulation of Payment Aggregators and Payment Gateways.

However, in November 2022, RBI rejected PPSL’s application and asked the company to resubmit it, to comply with Press Note 3 under FDI rules.

“As part of the Application, PPSL had also applied to the Government of India for approval of downstream investment made by the Company in PPSL, which is currently awaited. We will update the stock exchanges as and when approval is received. Meanwhile, PPSL continues to serve its existing online merchant partners,” Paytm said in a regulatory filing.

The banking regulator asked the firm in November 2022 to re-submit applications within 120 days after it gets government approval on investment made by OCL into PPSL as per FDI guidelines.

The regulator asked PPSL to continue operations with the condition that no new merchants should be onboard.

After the completion of 120 days, RBI again granted PPSL an extension but without removing the bar on new merchant onboarding.

Under Press Note 3, the government had made its prior approval mandatory for foreign investments in any sector from countries that share a land border with India to curb opportunistic takeovers of domestic firms following the COVID-19 pandemic.

Countries that share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.

Paytm has received significant investments from Chinese companies.

“We would also like to highlight that there have been changes in the ownership structure of the Company, with the Paytm founder, Mr Vijay Shekhar Sharma, now being the sole Significant Beneficial Owner. This was informed to the stock exchanges on September 03, 2023,” the filing said.

Paytm in August 2023 announced that Sharma would acquire a 10.3 stake in Antfin through his overseas entity Resilient Asset Management BV which will make him the largest stakeholder in the company with a 19.42 per cent stake.

In return, Resilient issued a debt instrument –optionally convertible debentures, to Antfin thereby maintaining the economic interest of Alibaba group firm.

With this transaction, Antfin’s direct stake in Paytm was reduced to 13.5 per cent. Antfin further sold 3.6 per cent in Paytm to bring its shareholding to less than 10 per cent and at present holds 9.89 per cent of the fintech firm.

(With PTI inputs)

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