In Trouble

Paytm Founder Vijay Shekhar Sharma must move fast as RBI's strictures against the payments business are beginning to hurt 

- ANAND ADHIKARI

PAYTM FOUNDER Vijay Shekhar Sharma, a Bollywood buff, finds himself confronting the kind of existential crisis often found in cinema.

This is because the Reserve Bank of India (RBI) has asked the group’s Paytm Payments Bank (PPBL) to halt most of its activities—like taking more deposits, conducting credit transactions, and allowing customers to top up their accounts—after February 29 due to persistent noncompliance.

One97 Communications (OCL), the parent company of Paytm, owns 49% equity in PPBL, with Sharma, the majority owner, holding the rest. RBI allows payments banks, under its differentiated licensing scheme, to accept current and savings deposits and offer payments products, but no lending is permitted.

Besides, both entities, OCL and PPBL, share close business linkages. The parent company’s Paytm app offers various payments instruments from Paytm Payments Bank, such as Wallet, Paytm UPI, FASTag, and fixed deposits.

As RBI Governor Shaktikanta Das pointed out after the recent meeting of the central bank’s monetary policy committee, lapses associated with Paytm had been pointed out multiple times. He said when constructive engagement doesn’t work or when the regulated entity does not take effective action, RBI imposes business restrictions. “Paytm should have corrected these issues two years ago, when RBI directed PPBL to stop onboarding new customers and appoint an IT audit firm to conduct a comprehensive system audit of its IT systems,” says a banker.