The poster boy of Indian startup Paytm was last week issued a directive by the RBI to stop accepting further deposits and also prohibits the bank from engaging in other services of the platform such as credit transactions, conducting top-ups on customer accounts, or facilitating payments for road tolls through prepaid instruments, wallets, or cards after February 29.
Paytm- The poster boy of the Indian startup ecosystem
Paytm is a prominent Indian digital payments and financial services company that has played a significant role in revolutionizing the country’s digital economy. The company was founded by Vijay Shekhar Sharma in 2010. Vijay Shekhar Sharma, an entrepreneur and visionary, started Paytm to make digital transactions accessible to the masses. Paytm initially began as a mobile recharge and bill payment platform but rapidly expanded its services to include a diverse range of financial products. The company’s success can be attributed to its innovative approach, user-friendly interface, and the timely adoption of emerging technologies and today it offers various services such as insurance, stock trading, and even small loans.
What is the Reserve Bank of India (RBI) crackdown on Paytm?
The fintech giant was allowed to take deposits from its customers and not to lend by the banking authority of India making it a restricted bank, but last week the apex banking authority of India RBI issued a directive to the fintech leader to cease accepting additional deposits. Furthermore, the directive prohibits the bank from engaging in other services of the platform such as credit transactions, conducting top-ups on customer accounts, or facilitating payments for road tolls through prepaid instruments, wallets, or cards after February 29.
Customers using the wallet will be able to utilize their funds until their balance is depleted. However, starting from February 29, they will no longer have the option to add more money. If the Reserve Bank of India (RBI) does not reconsider, the ability to top up the Paytm wallet will cease, and transactions through it will no longer be possible
Paytm market share
Paytm Wallet, a part of Paytm Payments Bank Limited (PPBL), holds a leading position in its segment. According to the Reserve Bank of India’s provisional data for December 2023, users of Paytm Wallet conducted 24.72 crore transactions, amounting to over Rs 8,000 crore, for the purchase of goods and services. Additionally, 2.07 crore transactions were executed, transferring sums exceeding Rs 5,900 crore.
What is the future for Paytm?
As per the directive issued by the RBI, no additional deposits are allowed by the apex banking authority affecting the services of the platform as a whole, and deposits are only allowed until Feb. 29 and 1st March onwards the balance remaining in the customers’ wallet can only be used until exhaustion.
India- Leader in digitization
India has witnessed a remarkable surge in digital transactions, marking a transformative shift in the country’s financial landscape. Fueled by advancements in technology, widespread internet penetration, and government initiatives promoting a digital economy, digital transactions have experienced exponential growth in recent years. The biggest reform undertaken by the Indian government is the unified payment interface (UPI) which brought a remarkable change in the number and volume of transactions in India.
There are over 20 banks and non-banking entities that offer wallet services. The leading ones after the PPBL wallet include Mobikwik, PhonePe, SBI, ICICI Bank, HDFC, Amazon Pay, etc.
Reason for the crackdown on Paytm
Several issues led to the crackdown ranging from money laundering allegations in hundreds of crores within the Paytm wallet and the banking arm of the company and lakhs of non-KYC compliant accounts being opened with only a single PAN being used for opening multiple accounts.
The Vijay Shekhar Sharma-led company has said that they are in regular discussion with the authorities to resolve the issue as soon as possible and also stated that the insurance services and loan disbursement services which fall under the financial services are not in any way linked to the Paytm payments bank ltd (PPBL) and will keep functioning beyond 29th of February
Bhaarat Bulletin’s Shikha Rai, Bimal Dev, and Paytm have contributed to the above report