In its most recent note, Macquarie stated that the Reserve Bank of India’s decision to prohibit Paytm Payments Bank Ltd from engaging in new credit and deposit operations, top-ups, fund transfers, and other similar banking operations by the 29th of February 2024 will have significant repercussions. This decision will significantly hinder Paytm’s ability to retain customers within its ecosystem, and as a result, it will restrict the company’s ability to sell payment products and loan products.
“We think revenue and profitability implications in the medium to long term could be significant and remain a key item to monitor,” according to the report.
In a statement, Macquarie stated that the Reserve Bank of India (RBI) had waited fifteen months to lift its prohibition on the digital commercial activities of the largest private sector bank. However, in the case of Paytm, the Reserve Bank of India (RBI) has carried out a full IT audit and has continued to identify non-compliance, which, in its opinion, suggests that the lapses are rather significant. Although the first prohibition for onboarding new clients was in March 2022, it has been 22 months since the ban was implemented.
“Accordingly, we do not see any near term solution to these problems and this effectively means, in our view, that RBI is indirectly revoking the PPI (pre-paid instrument) licence of Paytm,” the statement stated. According to Macquarie, the more significant problem is that Paytm has not been in good standing with the regulator for the past few years, and going forward, their lending partners may also consider reevaluating their connections with them.
As of the time that this note is being written, we have not engaged in any conversations with the management, nor have we been able to locate any news release issued by the company. According to Macquarie, the opinions expressed here are completely based on our perception of the steps taken by RBI.
Paytm
The payment bank run by Paytm is home to all of the more than 33 crore wallet accounts. It is possible for Paytm to continue to leverage PBPL’s customer base for the purpose of providing payments and financial goods. This is because the current MTU (monthly transacting users) for Paytm is 10 crore, and the earlier ban was for onboarding new customers.
Existing customers are not permitted to conduct out fundamental banking operations such as credit, deposits, cash transfers, UPI transactions, FASTag toll payments, bill payments, and use wallets. Paytm has a market share of 17 percent and provides services to 6 crore consumers.
“Given the severe restrictions imposed on PBPL, we believe it significantly hampers Paytm’s ability to retain customers in its ecosystem, and accordingly restricts it from selling payment products and loan products,” the statement stated.
ALSO READ: PM Modi lauds Nirmala Sitharaman’s ‘Viksit Bharat Budget’