Paytm Payments Bank violated RBI norms: RBI
The Reserve Bank of India (RBI) on Friday asked Paytm Payments Bank to stop opening new accounts amid “material supervisory concerns” observed in the bank. “Reserve Bank of India has today, in the exercise of its powers, inter alia, under Section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank Ltd to stop, with immediate effect, onboarding of new customers,” the central bank said in a statement.
Paytm has also been directed to appoint an IT audit firm to conduct a comprehensive system audit of its IT system. This development shows that Paytm has violated RBI norms. In December 2020, the RBI had barred HDFC Bank from launching any new digital products or services and issuing new credit cards till the lender resolved recurring tech issues.
“Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing the report of the IT auditors. This action is based on certain material supervisory concerns observed in the bank,” said the statement issued by RBI.
Paytm Payments Bank was incorporated in August 2016 and formally began its operations in May 2017 from a branch in Noida. Paytm’s largest shareholding was controlled by Chinese billionaire Alibaba’s firms. After the recent successful IPO of Rs.16,600 crore, the Chinese firm’s shareholding was reduced from 30% to 25%.[1]
There are allegations that Paytm has hyped its share price. On the very first listing day (November 2021) the share price of Rs.1950 started collapsing. On the very first day shares were down 27% creating a huge loss to investors[2]. The current price of a Paytm share is only Rs.776. This means that in just four months, investors lost 60 percent of their money.
Reference: –
[1] Paytm gets SEBI nod for mega Rs.16,600-cr IPO. Chinese firm Alibaba Group’s shareholding expected to reduce from 30% to 25% after IPO – Oct 22, 2021, PGurus.com
[2] Paytm shares close 27% lower from issue price on listing day – Nov 18, 2021, Live Mint
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