As the Reserve Bank of India (RBI) issued a ban on multiple activities of Paytm Payments Bank and its associated services, Paytm's Founder and CEO Vijay Shekhar Sharma took to Twitter assuring users that the Paytm app will continue to work beyond February 29, 2023. Here's a breakdown of what happened and how it affects Paytm users and Paytm Payment Bank customers.
On January 31, 2024, the RBI issued a notification citing "persistent non-compliance and continued material supervisory concerns" as reasons for a ban on Paytm Payments Bank on accepting deposits credit transactions or top-ups. The RBI also prohibits the onboarding of new users from February 29, 2023. However, existing users need not worry about retrieving their money.
The ban on Paytm Payments Bank will only affect users who are currently using Paytm-linked services like wallets, FASTags, NCMC (National Common Mobility Card) cards, and more. Users will still be able to withdraw their money but won’t be able to transfer funds to others using IMPS, UPI or any online mode of transfer. Many people using the Paytm UPI application are confused if they can continue using it. Essentially the RBI action is against the banking operations of Paytm ( Paytm Payments Bank), meaning customers can continue to use Paytm as a digital payment option so long as their account is linked to an external bank.
Paytm's Founder and CEO Vijay Shekhar Sharma wrote on Twitter, "To every Paytmer, Your favourite app is working, will keep working beyond February 29, 2023, as usual…For every challenge, there is a solution and we are sincerely committed to serving our nation in full compliance. India will keep winning global accolades in payment innovation and inclusion in financial services - with PaytmKaro as the biggest champion of it."
In response to the RBI's directive, Paytm assured its users that Paytm's app will continue to work beyond February 29, 2023, as most of its services are in partnership with various banks, not just the associate bank facing the ban.
The company said it plans to accelerate its collaboration with third-party banks for the same.
“In offline versions, where you see our All-in-one QR, powered by Paytm Payments Bank… now that QR will need to be changed to any other sponsored bank. This will be a large exercise, the new acquisition will start in a week or two,” Paytm President and COO Bhavesh Gupta said yesterday. This may not be an easy task as it is the largest beneficiary bank in the Unified Payments Interface ecosystem holding a quarter of all credit transactions in the UPI ecosystem. A beneficiary bank is the institution that has the most inbound transactions or more credits than debits.
The company reassured customers that their investments in Paytm Money, the investment arm of Paytm, in equity, mutual funds, or NPS are safe and unaffected by the ban.
Other services including loan distribution and insurance, remain separate from Paytm Payments Bank and are expected to be unaffected by this direction, it said.
Despite these assurances, shares of One97 Communications Ltd., the parent company of Paytm, have already dropped by over 40 per cent from Rs 761 to Rs 487, since the announcement.
