India’s central bank has delayed certain business limitations on Paytm’s Payments Bank until March 15 in “larger public interest,” shattering expectations of big concessions but giving more time to comply.
On Friday, the RBI said that Paytm Payments Bank would be banned from collecting deposits and credit transactions from March 15. The order originally had a February 29 deadline.
Paytm’s $20 billion market worth, which launched in 2021, was cut by 55% this month after limitations. Over 15 million retailers and 330 million wallet clients use the technology. The company had over $1 billion in cash reserves in December.
The RBI said 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 said Friday evening that Paytm’s Wallet (with over 330 million consumers) and FASTag products would disappear due to the new explanation. Paytm dominated FASTag.
«There was no specific exemption for a wholesale transfer of wallets or Fastag to another bank; therefore, these products would cease to exist—this was widely predicted to be negative,» Bernstein analysts said. India’s toll-collecting company is FASTag.
The central bank stated that several other payments and bank services may be used until March 15 instead of February 29. The RBI provided a FAQ (PDF) on how the Paytm Payments Bank restriction would affect merchants and consumers. If connected to other bank accounts, retailers employing Paytm’s QR code, soundbox, and point-of-sale terminal devices would not be affected by the outage, the central bank stated.
This is great, but we would have wanted to know what businesses need to do to keep utilizing these payment methods, if any (e.g., re-KYC). Can Paytm support these payments, and what must it do? In a note Friday, Bernstein analysts said: “Switch over Nodal accounts, partner with another bank as a PSP, etc.
Last month, the RBI ordered Paytm to deactivate nodal accounts by February 29. It’s keeping this deadline—payment corporations utilize such accounts to trade. Paytm switched its nodal account to Axis Bank on Friday.
“This arrangement should seamlessly replace OCL’s Paytm Payments Bank nodal account. The company stated that Paytm Payment Services Ltd. (PPSL), OCL’s fully owned subsidiary, has used Axis Bank services since its founding.
Macquarie cut its Paytm price estimate to 275 rupees, or $4.11, this week due to regulatory uncertainties, raising concerns that consumers may leave. Shares closed Friday at 341 rupees.
Paytm’s infractions have not been publicized, but the RBI indicated last week that it only acts on “persistent non-compliance.” According to Governor Shaktikanta Das, the bank takes remedial action bilaterally first. Any reaction is “proportionate to gravity.”
Many expected the RBI to soften, but Friday’s news shows otherwise.
Bernstein claims Paytm wallet and FASTag will go.
