RBI restriction on Paytm: According to Macquarie, it took the RBI 15 months to lift its prohibition on the largest private sector bank’s digital business operations. However, the RBI has carried out an extensive IT examination in the instance of Paytm.

Latest Market : The RBI’s decision to forbid Paytm Payments Bank Ltd. from conducting new credit and deposit operations, top-ups, fund transfers, and other similar banking operations by February 29, 2024, according to Macquarie’s most recent note, will have serious ramifications because it will severely impair Paytm’s ability to keep users in its ecosystem, which will in turn limit its ability to sell payment 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,” concluded the report. According to Macquarie, it took the RBI 15 months to lift the prohibition on the largest private sector bank’s digital commercial operations. In Paytm’s case, however, the RBI has carried out a thorough IT assessment and has continued to find non-compliance since the initial prohibition (in March 2022) for onboarding new consumers (22 months have passed), which in its opinion suggests that the lapses are rather serious.

“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,” it stated.

The greater problem, according to Macquarie, is that Paytm has not been in good standing with the regulator. As a result, their lending partners may decide to reevaluate their partnerships in the future.

“At the time this note was written, we had not communicated with the management or seen any corporate press releases. The opinions expressed here are only based on how we understand the RBI’s actions,” Macquarie stated.

Every wallet account with more over 33 crore is kept in Paytm’s payment bank. Since the previous limitation was for onboarding new users, and Paytm’s current MTU (monthly transacting users) is 10 crore, Paytm may be able to continue using PBPL’s customer base to sell financial products and payments.

Basic banking operations such as credit, deposits, fund transfers, UPI transactions, FASTag toll payments (Paytm has a 17 percent market share and 6 crore users), bill payments, and wallet usage are not allowed for current customers.

“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,” stated the statement.

Disclaimer : The above article is meant for informational purposes only, and should not be considered as any investment advice.

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