RBI’s Big Action on Paytm: What Happens To Your Money in Paytm?
31 Jan was the typical day for many, but not for Paytm, as news burst out early this morning about the RBI verdict on Paytm. What was the news?
Paytm suffered a serious setback when the Reserve Bank of India (RBI) prohibited its Paytm Payments Bank from providing its essential services, including fund transfers and wallets. As a result, it cannot take top-ups or deposits into any customer account.
This news burst like a fire in the jungle because Paytm is one of the biggest names in the fintech sector. With over 300 million wallets and 30 million bank accounts, Paytm provides services to millions of people throughout the Country.
Following the recent news, numerous Paytm users are questioning the status of their funds stored in their Paytm wallet and bank account.
On the other hand, there are still many individuals who remain unaware or confused about the situation.
If you are a Paytm user or if someone in your family or friends is using it, this article is a must-read for you.
We’ll break down the news in simple terms to ensure everyone understands the situation clearly.
So, let’s get started!
What is the Issue of Paytm?
In India’s digital world, Paytm plays a big role in making payments easier. You might remember their “Paytm Karo” slogan that helped make digital payments popular.
But recently, there’s been news that’s like a bump in the road for Paytm. It all started when the Reserve Bank of India (RBI) released a report.
In their press release, the RBI announced that, under section 35A of the Banking Regulation Act, 1949, they have directed Paytm Payments Bank Ltd to stop onboarding new customers immediately. Additionally, the bank has been instructed to engage an IT audit firm to conduct a thorough system audit of its IT systems. The onboarding of new customers by Paytm Payments Bank Ltd will only be allowed after the RBI grants specific permission following a review of the IT audit report.
These actions have been taken due to certain significant supervisory concerns identified within the bank.
The Impact of the Paytm Crisis
The release of this news has created a ruckus in the fintech sector and among Paytm users. Let’s see in detail the impact of news on Paytm and users:
- Effect on Paytm: After the Reserve Bank’s directive to halt its services by February 29, Paytm experienced a significant decline in its market value.On the first day alone, shares plummeted by 20%, marking the company’s worst performance since its listing in 2021. Stock prices hit a six-week low of 609 rupees, resulting in approximately $1.2 billion in lost company value.The downward trend continued, with strong selling pressure causing the stock to hit its 20% lower circuit for the second consecutive session.Opening at its 20% lower circuit at ₹487.05, the share price suffered a substantial drop from the previous close of ₹608.80 on the BSE.
Overall, the two-day losses amounted to a staggering $2 billion wiped out from its market value.
- Here’s how it will impact customers: Customers using Paytm are feeling anxious because, after February 29, they won’t be able to make additional deposits, credit transactions, or top-ups in their accounts, including prepaid instruments, wallets, FASTags, or National Common Mobility Cards.Moreover, new users won’t be allowed to create accounts. However, existing customers can still access and utilize the money in their accounts, which brings some relief amidst these changes.
What’s the official Word From Paytm on this matter?
Amidst the ongoing issue, Paytm announced on Thursday that it would exclusively collaborate with other banks and not its own Paytm Payments Bank.
This decision was shared during an investor’s meeting, where Paytm founder and CEO Vijay Shekhar Sharma was present. It comes a day after the Reserve Bank of India directed the subsidiary to halt accepting deposits after February 29.
The Impact of Paytm Crisis on Other Fintech Giants?
Paytm’s recent struggles, including the RBI restriction on its banking unit accepting new deposits, have sent shockwaves through the Indian fintech industry. While the immediate impact falls on Paytm itself, there are potential ripple effects that could influence other fintech giants as well. Here’s a breakdown of the possible scenarios:
- Competitive Advantage: For Paytm’s direct competitors like PhonePe, Google Pay, and Mobikwik, the problem could present an opportunity to gain market share by attracting dissatisfied Paytm users and investors seeking safer alternatives.
- Focus on Fundamentals: The Paytm crisis might serve as a wake-up call for other fintech players to focus on building sustainable business models with clear paths to profitability, potentially leading to a healthier industry in the long run.
- Regulatory Clarity: The RBI’s action could provide much-needed clarity on regulations for the fintech sector, leading to a more predictable and stable operating environment for all players once the dust settles.
What Paytm founder & CEO Vijay Shekhar Sharma Has to say on this Crisis
Amidst a crisis triggered by the Reserve Bank of India (RBI) imposing restrictions on Paytm Payments Bank, wallet, and other services, CEO and founder of Paytm Payments Bank, Vijay Shekhar Sharma, politely reminded a group of entrepreneurs that the “Indian startup dream must overcome every situation collectively.
Additionally, he expressed gratitude for the unwavering support from everyone.
What are Other Fintech Giants saying about this Issue?
Following significant business restrictions imposed by the Reserve Bank of India (RBI) on Paytm Payments Bank due to ongoing non-compliance and supervisory concerns, Ashneer Grover, former founder of fintech firm BharatPe, criticized the central bank’s actions, stating they were detrimental to fintech firms’ interests.
In His Recent Tweet, Grover stated, “I don’t understand RBI. Clearly, RBI does not want fintechs in business. Of late, all regulations/moves are against Fintechs. Such moves will kill the sector altogether”.
Grover also urged Finance Minister Nirmala Sitharaman and Prime Minister Narendra Modi’s office to intervene, expressing concern that RBI’s recent regulations and actions are disproportionately targeting fintechs and could potentially harm the entire sector.
Do you believe this poses a genuine threat to India’s Fintech Sector? Please leave your comments below with your thoughts.
FAQ
What is the Paytm Issue?
The Reserve Bank of India (RBI) has prohibited Paytm, a leading fintech company, from providing banking services to its customers due to non-compliance and ongoing material supervisory concerns.
What happens to money in my Paytm wallet?
Users can still access and use their money in the Paytm wallet until February 29th. You have a month to withdraw or utilize your funds, so there’s no need to panic.
Is it the end of Paytm?
No, Paytm is still operating and offering its various services. The RBI directive only impacted specific services of Paytm Payments Bank, not the entire Paytm ecosystem.
What will happen with Paytm FASTag?
If you have a Paytm Fastag, you’ll need to get a new one from a different provider and stop using the old one by the end of February. You can still use any remaining balance on your old Fastag until it runs out, but you won’t be able to add more money to it after February.
