- Paytm shares plunged 20% as India’s central bank froze affiliate Paytm Payments Bank.
- The RBI cited “persistent non-compliance and material supervisory concerns.
- The dramatic regulatory action sent shockwaves through India’s fintech sector.
Paytm crisis triggered by RBI freeze
Shares of Indian fintech giant Paytm crashed by 20% this week after the Reserve Bank of India (RBI) ordered a complete freeze on its affiliate Paytm Payments Bank.
The central bank barred the bank from onboarding new customers or allowing additional deposits.
While existing deposits remain intact, Paytm Payments Bank can no longer offer critical services like fund transfers and UPI payments.
The RBI said its audit found “persistent non-compliance and material supervisory concerns.”
Fintech sector impact
Paytm sought to reassure customers that services offered in partnership with other banks remain unaffected. However, the company expects the RBI order to dent EBITDA by $35-60 million.
It also needs new banking partners for payments and aggregator services offered under the Paytm brand.
The dramatic regulatory action sent shockwaves through India’s fintech sector, with some investors warning it could severely impact innovation.
For market leader Paytm, the reputational and business damages mark a steep reversal just a year after its headline-grabbing IPO.
Despite its claim of minimal impact, Paytm’s plummeting valuation signifies rising uncertainty about its future.
