The license for the banking business is held by Paytm Payments Bank, and for it to be transferred back to Paytm, approval from the RBI is required, according to the report. However, obtaining this approval might be challenging given the concerns raised by the central bank.
Paytm has expressed its intention to keep the digital wallet business operational by establishing new banking relationships, the report said. Paytm CEO Vijay Shekhar Sharma said Thursday (Feb. 1) that it would not be difficult to forge such partnerships.
In a Thursday post on X, formerly known as Twitter, Sharma told Paytm users: “Your favorite app is working, will keep working beyond 29 February as usual.”
To every Paytmer,
Your favourite app is working, will keep working beyond 29 February as usual.
I with every Paytm team member salute you for your relentless support. For every challenge, there is a solution and we are sincerely committed to serve our nation in full…
— Vijay Shekhar Sharma (@vijayshekhar) February 2, 2024
However, operating the digital wallet business without the license held by Paytm Payments Bank may not be possible, per the report.
The RBI’s concerns have also affected Paytm’s ability to form partnerships with banks, according to the report. Several Indian banks have expressed caution about doing business with Paytm due to the regulatory concerns raised by the RBI. Any partnership with Paytm to provide banking services for their digital wallets would require prior approval from the central bank.
The uncertainty surrounding Paytm’s license has had an impact on its market value, the report said. Paytm’s shares have dropped 20% for two consecutive days, resulting in a loss of approximately $2 billion in market value. The company’s shares are trading near record lows, and several analysts have downgraded their ratings on the stock and lowered their target prices.
Apart from the impact on its digital wallet business, Paytm’s other services are also expected to be affected by the RBI’s order, per the report. Paytm’s digital highway toll payment service, known as FASTag, will no longer be able to accept replenishments after Feb. 29. This service holds a 17% market share.
This is not the first time Paytm has faced regulatory challenges, according to the report. In 2022, the RBI fined Paytm Payments Bank for non-compliance with regulations, including know your customer rules, and ordered an IT system audit. The company has also faced concerns about its valuation, business model and profitability.