Paytm Commits to Sustaining Digital Wallet Amid Regulatory Hurdles

Paytm, one of India’s prominent digital payment companies, faces uncertainty regarding its license as the Reserve Bank of India (RBI) has instructed it to cease accepting deposits after February 29, according to PYMNTS.

The RBI’s directive has raised concerns about the future of Paytm’s banking operations and its ability to continue offering digital wallet services. The license for the banking business is held by Paytm Payments Bank, requiring approval from the RBI for it to be transferred back to Paytm, a process that might prove challenging given the central bank’s concerns.

Paytm has voiced its determination to keep the digital wallet business operational by establishing new banking partnerships. Paytm CEO Vijay Shekhar Sharma mentioned that forging such partnerships would not be difficult.

In a Thursday post on X (formerly known as Twitter), Sharma reassured Paytm users, stating, «Your favorite app is working, will keep working beyond 29 February as usual.»

However, operating the digital wallet business without the license held by Paytm Payments Bank may present difficulties.

The RBI’s concerns have also impacted Paytm’s ability to collaborate with banks. Several Indian banks have hesitated to engage with Paytm due to the regulatory uncertainties raised by the RBI. Any potential partnership with Paytm to provide banking services for their digital wallets would necessitate prior approval from the central bank.

The uncertainty surrounding Paytm’s license has negatively affected its market value. Paytm’s shares have experienced a 20% decline for two consecutive days, resulting in a loss of approximately $2 billion in market value. The company’s shares are now trading near record lows, with several analysts downgrading their ratings on the stock and lowering their target prices.

In addition to its digital wallet business, Paytm’s other services are also expected to be impacted by the RBI’s order. Paytm’s digital highway toll payment service, known as FASTag, will no longer be able to accept replenishments after February 29, despite holding a 17% market share.

This is not the first time Paytm has encountered regulatory challenges. In 2022, the RBI imposed fines on Paytm Payments Bank for non-compliance with regulations, including know your customer rules, and mandated an IT system audit. The company has also faced scrutiny regarding its valuation, business model, and profitability.