The Reserve Bank of India (RBI) has reportedly instructed Paytm Payments Bank to stop onboarding new clients and to also hire an IT audit company while citing “supervisory concerns.”
In an official statement, the RBI stated that Paytm Payments Bank should stop taking on new clients immediately and appoint a company to properly audit its IT systems.
After examining a report from the auditors, the RBI said it would be deciding whether to give permission for customer onboarding to resume.
As noted by the reserve bank, this particular action is “based on certain material supervisory concerns observed in the bank.”
Paytm Payments Bank – which is 51% owned by Paytm founder Vijay Shekhar Sharma – was only given approval by the RBI to operate as a scheduled payments bank in December 2021, a move that allowed the company to provide a more extensive range of financial services.
As reported by local news outlets, Paytm is considered one of India’s pioneers in the fast-evolving digital payments sector.
The Paytm Group has been told not to onboard additional customers by the Reserve Bank of India this past Friday. The RBI only pointed out that there were “material supervisory concerns” as a justification for its decision (which may be related to Know Your Customer requirements).
According to a report from Live Mint, this may be due to a previous red flag on this matter by the RBI back in 2018. The payments Fintech will perform a thorough system audit and try to fulfill the requirement outlined by the RBI.
It’s worth noting that shares of Paytm fell to an all-time low (over 12% to ₹672) on the BSE early Monday.
As covered in November 2021, the Government of Singapore, BlackRock Global Funds, and the Canada Pension Plan Investment Board are among the reported 122 institutional investors who have gobbled up more than $1 billion worth of shares in Paytm, which in a few short years has grown into an Indian financial powerhouse.
Backed by Ant Group, Paytm had earmarked $1.11 billion in shares, equivalent to 82.35 billion rupees, in an expected initial public offering (as reported in November of last year). The move was in preparation for what many expected to be India’s largest-ever IPO.
Paytm’s IPO was actually India’s largest-ever but then flopped in its debut. According to analysts, this was because investors had come to their “senses.”
