Breaking News: RBI Places Limits on Paytm's Banking Operations

Learn about the future of Paytm's banking arm after RBI's action. Get insights into the impact on Paytm's business and what it means for customers.

Feb 1, 2024 - 03:33
Feb 1, 2024 - 03:33
 185
Breaking News: RBI Places Limits on Paytm's Banking Operations
Paytm's Banking Future After RBI Action

The Reserve Bank of India (RBI) has given orders to Paytm's banking arm, telling it to stop taking new deposits starting from March. This big decision hits hard at one of India's largest payment companies, causing Paytm's shares to drop by 20%.

Understanding Paytm's Banking Side:

Paytm Payments Bank started in 2015, following the rules for banks set by the government. It began working in November 2017, focusing on taking in deposits of up to 200,000 Indian rupees ($2,400) without giving out loans. Instead, it puts the money in government securities or in other banks.

Who Owns Paytm's Bank and How It's Related to Paytm:

Paytm's banking part is mostly owned by Paytm itself, owning 49%. The CEO of Paytm, Vijay Shekhar Sharma, owns the other 51%. This bank is crucial for Paytm because it handles the money in Paytm's digital wallets.

Why Did the RBI Step In and What's the Issue:

The RBI's order stops Paytm's bank from taking in new deposits, lending money, or helping with fund transfers after February 29. This is because the RBI has concerns about rule-breaking and problems with supervision. Similar restrictions happened in March 2022.

Paytm's Reaction and What It Means:

Paytm says it will follow the RBI's orders right away. It plans to stop working with its bank and start working only with other banks. Paytm thinks it might lose between 3 to 5 billion rupees ($36-60 million) in its yearly earnings because of this.

How This Affects Paytm's Business and Money:

Experts say Paytm might have a hard time fixing its reputation because of this. They also say that this adds more trouble to Paytm's business because of the already strict rules. But, Paytm's bank has enough money because it's put in safe places like government bonds and other banks.

In summary, Paytm faces a tough time as the RBI keeps a close watch. To get through this, Paytm needs to follow the rules better and make smart changes to stay strong.

Also Read: India Allocates $48 Billion for Food and Fertilizer Subsidies in the Upcoming Year

iShook Opinion Curated by iShook Opinion and guided by Founder and CEO Beni E Rachmanov. Dive into valuable financial insights at ishookfinance.com for expert articles and latest news on finance.