PAYTM (KUCH) KARO! What next ?

What has happened?

RBI has asked the payments bank to stop deposits, transactions, prepaid instruments, and top-ups in customer accounts, wallets, FASTags, prepaid instruments, and NCMC cards from 29th Feb 2024. The shares fell almost 40% in 2 days since this news.

Difference between Traditional and Digital Payment Banks?

Unlike traditional banks, payment banks cannot provide loans or credit cards of their own but can issue debit cards and digital services. 

Real Reasons

When Paytm launched its services, it had a default Paytm Payments Bank opening approval in the basic KYC process, without consent. It also started including Agents who would get paid a certain amount for opening a savings account. This went on to take a wrong turn and became some sort of MLM Scheme. It failed to follow certain compliances laid down by the RBI

Challenges now

With the Closure of Payments Bank, their UPI business will also be affected.  New banks will have to be approached to become their Nodal Account partner -Competitors will benefit a lot in the meantime due to a lack of Trust.

Some Positives

Startup Founders unifying and seeking some lineage from the Finance minister and RBI. Players like Hdfc bank are still showing interest in becoming their Nodal Account bearers. Paytm shares finally seeing a recovery.

What Next?

Paytm's point of few- They need to find another bank to replace their Nodal Account before 29th Feb. Investors- Wait for things to settle down and buy only when things start to make sense again.