On Jan 31st, RBI made a press release imposing severe restrictions on Paytm Payments Bank. You can read the circular here.
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=57224
The quantum of punishment came as a shocker. The order basically meant that Paytm Payments Bank, Wallet and Fastags will cease to exist from March 2024. Such a harsh punishment to one of the best Fintechs and flagbearer of Digital India came as a huge surprise.
RBI's step-motherly treatment of new age digital payment banks
I have several objections on the manner in which Paytm, its users and investors have been treated by RBI. First of all, RBI has not given clear or detailed view of the non-compliances from the company. "Persistent non-compliances and continued material supervisory concerns" are just buzz words. We have trust in RBI that it must have acted for valid reasons, but if RBI had given clear details, other Fintechs could have learnt lessons from those and it would have benefited the sector as a whole.
It is strange that is mostly seen taking harsh actions on new age digital banks like Paytm, whereas all kinds of scandals and scams are actually seen happening in public sector and traditional banks. Have you ever heard RBI taking such a harsh action on traditional brick-and-mortar banks?
Given that most new age digital 'payment banks' are new, it is natural that they would take more time to fulfill all the compliance and other requirements of RBI. But RBI is giving them death-blows and handling them with iron fist; which is shocking.
Impact on Paytm's business
What does the order mean for Paytm? Paytm UPI is not impacted; it will continue working as before. From what I read, only wallet, Paytm bank and fast tags are impacted. We can keep paying via UPI by linking other bank's account with UPI on Paytm. Other Paytm services like movie tickets, train and flight tickets, will keep working as before.
I think Paytm will survive, but it will become more like PhonePe and other UPI based apps. Only PPBL "bank accounts" will be not working and wallets won't work. We shall be able to do all transactions via UPI mode. #PaytmSeUPI will keep working after being linked to other bank accounts.
RBI being oblivious of "investors"
RBI could have given a deadline to Paytm to comply with its requirements or else bank/wallet/fastags will be banned. Then, Paytm, a listed company, would be under investors pressure to comply. But this sudden abrupt direct ban is made to shock stock market and it is too unfair.
I had Paytm stock which had just recovered from 20% down. Paytm had reported lowest losses last quarter. Just when things looked good for Paytm stock, RBI gave this death-blow to it which is totally unfair to stock market investors. RBI must learn to act better in future.
The way RBI has directly banned Paytm Payments Bank, wallet and Fastag, is a "cowboy" like "hit and run" method and it is totally unfair. You shouldn't act against publicly listed companies in this manner. Give proper warning, let investors know in advance, and then take action.
RBI being disregarding to "merchants"
The deadline given by RBI to Paytm is only "28 days" which is too short. Many merchants and customers won't even come to know about it in such a short span of time. Even if Paytm wanted to help merchants migrate to other banks, the company can't do it for millions of merchants in just 28 days. RBI should have given at least 4 months to Paytm Payments Bank to help migrate its merchants to other banks.
Future of Paytm
I think Paytm has one month's time to allow Fastags to get charged directly from UPI (for users who link other bank accounts). Or try to comply with RBI and get all services to keep working. Paytm should survive and become stronger.
Paytm is India's first and best "Super App". You can do almost everything with Paytm, flight tickets, recharges, movie tickets, UPI payments, and what not. After RBI's order, Paytm will only pause its own bank, rest services will continue. Hope Paytm remains strong.
- Rahul Tiwary
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