RBI cancels Paytm Payments Bank licence; shares slide as core services continue

Paytm’s parent One97 Communications saw its stock fall around 8% after the Reserve Bank of India cancelled Paytm Payments Bank’s banking licence and announced a winding-up of the subsidiary. The action marks a significant regulatory setback for the fintech group as it navigates the fallout and seeks clarity on licensing opportunities ahead.

In a post-market filing, Paytm said PPBL would be wound up, but emphasized there is no direct exposure to the bank and that PPBL operates independently. It also noted that there would be no material impact on Paytm’s broader business since it had already impairment-hedged its investment in PPBL as of March 31, 2024, and that payments, wallets and other services would continue to function without interruption.

The RBI cited persistent non-compliance with regulatory norms and deemed the bank’s operations detrimental to depositors and public interest, highlighting lapses in compliance during its track record. PPBL had operated under a limited banking license since 2015, which permitted small deposits but not lending. The episode comes after more than two years of regulatory scrutiny and restrictions, including a ban on fresh deposits in 2024.

Analysts offered mixed takes: Bernstein flagged concerns about the regulatory tone but remained constructive on Paytm, expecting limited disruption and potential licensing opportunities ahead. Others note that the write-off had already been accounted for in the books and that the long-term investment thesis will hinge on what licensing avenues may reopen for the parent group. Meanwhile, some market watchers cautioned that deposits, if any remain, may require customers to withdraw before closure, underscoring the drag on sentiment in the near term.

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