Shares of One 97 Communications (OCL), parent of Paytm, were locked in a 20% lower circuit limit in opening trade today after the Reserve Bank of India (RBI) imposed severe business restrictions on the payment services arm of the company. The central bank has directed Paytm Payments Bank (PPBL) to stop onboarding new customers with immediate effect, while it has been barred from taking further deposits or credit transactions or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29.

Responding to the RBI action, the Vijay Shankar-led company in an exchange filing says that Paytm Payments Bank (PPBL) is taking immediate steps to comply with RBI directions, including working with the central to address their concerns as quickly as possible.

“The company has been informed that this does not impact user deposits in their savings accounts, Wallets, FASTags, and NCMC accounts, where they can continue to use the existing balances,” it says in a BSE filing.

The release further states that OCL, as a payments company, works with various banks (not just Paytm Payments Bank), on various payments products. “We now will accelerate the plans and completely move to other bank partners. Going forward, OCL will be working only with other banks, and not with Paytm Payments Bank Limited.”

The next phase of OCL’s journey is to continue to expand its payments and financial services business, only in partnerships with other banks, it adds.

With regard to the direction on termination of the nodal account of OCL and PPSL by February 29, 2024, the company says that they will move the nodal to other banks during this period. It also clarified that other financial services such as loan distribution, insurance distribution, and equity broking, are not in any way related to PPSL and are expected to be unaffected by the RBI direction.

However, the company’s response failed to soothe investors’ nerves. In the opening trade, Paytm shares declined 20% to ₹608.8 against the previous closing price of ₹761 on the BSE. The market capitalisation slipped to ₹38,663 crore.

The shares of fintech major hit a 52-week high of ₹998.30 on October 20, 2023, and a 52-week low of ₹516 on February 1, 2023. In the last one year, the stock has risen 16% despite falling over 22% in the past six months. In the last one month, Paytm shares have lost nearly 6%.

On Wednesday, the RBI notified that it has directed PPBL to stop onboarding of new customers with “immediate effect”. The restrictions were imposed after a report of the external auditors revealed "persistent non-compliances and continued material supervisory concerns" in the bank.  This is the second time action has been taken against PPBL after March 2022 when it was asked to stop onboarding new customers. In March 2022, the RBI had imposed restrictions on PPBL and had directed it to appoint an IT audit firm to conduct a comprehensive system audit of its IT system. In an earlier action on October 20, 2021, RBI had imposed a monetary penalty of ₹1 crore on the bank for violation of Payment and Settlement Systems Act, 2007.

As per the RBI’s latest action, PPBL will be not allowed to take further deposits or credit transactions or top ups in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime.

“No other banking services, other than those referred in (ii) above, like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc.), BBPOU and UPI facility should be provided by the bank after February 29, 2024,” the release notes.

However, withdrawal or utilisation of balances by its customers from their accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc. will be permitted without any restrictions, up to their available balance.

The release also states that the nodal accounts of One97 Communications and PPSL have to be terminated at the earliest, in any case not later than February 29, 2024. The settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) has to be completed by March 15, 2024 and no further transactions shall be permitted thereafter.

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