Paytm, a digital payments company in India, is gearing up for a potential revival of its banking arm, Paytm Payments Bank.
The unit faced a significant setback last year when the Reserve Bank of India (RBI) effectively suspended its operations due to regulatory concerns.
Now, Vijay Shekhar Sharma, Paytm’s founder and CEO, is optimistic about resolving these issues and bringing the bank back on track.
The RBI’s decision to halt the operations of Paytm Payments Bank in early 2024 stemmed from an audit that flagged “persistent non-compliances and continued material supervisory concerns.”
According to reports, the central bank had spent nearly two years cautioning Paytm about governance issues arising from the intertwining of Paytm Payments Bank and its parent company.
The audit revealed irregularities in the flow of data and funds between the two entities, which raised serious accounting and supervisory red flags.
This regulatory action hit Paytm hard, as the bank formed the backbone of its digital payments business.
With the bank’s operations suspended, Paytm faced a sharp decline in its market presence and had to pivot quickly to maintain its footing.
Speaking to Bloomberg News at the 2025 World Economic Forum in Davos, Switzerland, Sharma expressed confidence that the issues plaguing Paytm Payments Bank could soon be resolved.
He stated:
“As far as the bank is concerned, which is a separate entity, now we are pretty much at an arm’s length, so it should get sorted out soon.”
Sharma emphasized that the company had learned valuable lessons from this ordeal and had significantly revamped its approach to doing business.
These changes are expected to address regulatory concerns while ensuring a more robust and transparent operational framework for the bank.
By separating the bank’s operations from those of its parent company, Paytm aims to demonstrate compliance with regulatory standards and restore confidence among stakeholders.
Paytm’s troubles come at a time when India’s digital payments ecosystem is fiercely competitive.
The company, which once maintained a dominant position in the market, now finds itself up against global giants like Google Pay and Walmart-backed PhonePe.
The regulatory crackdown gave these competitors an edge, and Paytm struggled to retain its market share during this challenging period.
Adding to the complexity is India’s rapid adoption of the Unified Payments Interface (UPI), which has streamlined digital transactions since its launch in 2016.
UPI’s instant payment system has created a level playing field, making it easier for newer players to enter the market and challenge established companies like Paytm.
Despite these hurdles, Sharma is determined to steer Paytm toward profitability.
The company has reportedly taken strategic steps to cut costs and streamline operations, including selling its movie and events ticketing business to Zomato.
Additionally, Paytm is awaiting regulatory approval to operate as a payments aggregator, a move that could diversify its revenue streams and strengthen its position in the market.
“We’re on track for operational profitability. We probably showed the numbers also,” Sharma told Bloomberg, signaling that the company is focused on financial sustainability.
The Paytm Payments Bank episode underscores the critical importance of regulatory compliance and robust governance in the Fintech sector.
As digital payments continue to grow in India, companies must navigate a complex regulatory landscape while competing in an increasingly crowded market.
For Paytm, this is not just a chance to rebound but an opportunity to rebuild its reputation and demonstrate that it can operate responsibly and sustainably.
Sharma’s optimism and the company’s strategic pivots suggest that Paytm is prepared to embrace these challenges head-on.
Paytm’s journey serves as a reminder of the resilience required in the volatile Fintech industry.
While the regulatory suspension dealt a significant blow, it also provided an opportunity for introspection and improvement.
By addressing past shortcomings and focusing on compliance, transparency, and innovation, Paytm can potentially reclaim its position as a key player in India’s digital payments landscape.
As the company works to revive its banking unit and regain market share, its success will depend on its ability to adapt to changing market dynamics and maintain the trust of regulators, investors, and customers.