Paytm Falls 8% After RBI Orders Wind-Up of Payments Bank

Shares of Paytm’s parent company, One97 Communications, crashed on Monday following a regulatory setback from the Reserve Bank of India. The financial regulator cancelled the banking licence of Paytm Payments Bank Ltd (PPBL) with immediate effect on April 24 (Friday).

Shares of One97 Communications tumbled nearly 8% to ₹1,065.05 per share in early trade. The stock has declined 16% so far this year, though it gained 7.6% last month.

The regulator has prohibited the company from carrying out any banking business in India, with the RBI stating that it will approach the High Court for the winding up of the bank.

The RBI cited multiple reasons for the cancellation of the licence, including breaches of the Banking Regulation Act.

“The affairs of the bank were conducted in a manner detrimental to the interests of the bank and its depositors,” the RBI said in a notification. “The general character of the bank was prejudicial to the interests of depositors and public interest, and the bank failed to comply with or violated conditions stipulated in the payments bank licence issued to it,” the statement added.

The RBI also noted that PPBL had previously faced regulatory action over KYC and governance lapses.

The bank had been prohibited from onboarding new customers since March 2022, while deposits, top-ups, and credits were restricted between January and February 2024. Wallets and accounts were effectively frozen from March 2024.

What Did Paytm Say?

Paytm stated that PPBL operates independently, with no involvement from Paytm’s management or board. It also said there would be no financial impact on the company, as it had divested its stake in PPBL in 2024.

On Saturday, following the RBI’s notification, the board of directors and shareholders approved the necessary resolutions to enable the winding up of PPBL, which will cease to exist as an associate company of Paytm.

800 Crores Stuck In Deposits

According to a report by CNBC-TV18, citing sources, over ₹800 crore of customer deposits remain stuck in PPBL, with nearly ₹400 crore in frozen accounts and another ₹400 crore as unclaimed deposits.

Analysts Remain Positive

Brokerage firms, including Jefferies and Bernstein, remain positive on Paytm and see up to 30% upside from its previous closing price.

Bernstein has an “outperform” rating on Paytm with a target price of ₹1,500 per share, while Jefferies has a “buy” recommendation with a target price of ₹1,350 per share.