The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), two of India’s leading stock exchanges, have cut the daily trading limit for shares of the massive digital payments company Paytm in half. With effect from Monday, the previous cap of 20% has been reduced to 10%. This move comes after Paytm’s valuation fell by an astounding $2 billion due to increased regulatory scrutiny of the company’s banking division.
Strict regulations
Paytm’s financial operations are under strict control thanks to the Reserve Bank of India (RBI). The banking division of Paytm was instructed earlier this week by the central bank to stop taking new deposits into user accounts and to stop adding money to well-known wallets starting in March. Since that Paytm’s operations are closely related to its banking industry, this directive has a great deal of implications.
Market turbulence
After the turbulent week at the Mumbai stock exchange, Paytm’s market value plummeted to just $3.7 billion, representing a significant $2 billion drop. The shares fell precipitously, reaching the 20% daily limit on Thursday and Friday in consecutive days.
The parent firm of Paytm, One97 Communications Ltd., saw a 40% drop in shares over the course of two days as a result of the RBI’s orders. On Friday, the BSE saw the stock drop to its lowest allowable limit of Rs 487.05, which reduced the company’s market capitalization to Rs 30,931.59 crore from Rs 17,378.41 crore.
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fundamental problems
The RBI is targeting Paytm Bank because of serious concerns about non-compliance with KYC regulations and money laundering. Claims indicate questionable exchanges of large amounts of money between Paytm and its banking affiliate. As a result, Paytm Payments Bank Ltd (PPBL) has been ordered by RBI to cease all significant activities after February 29. These activities include credit transactions, wallet top-ups, and client deposits.
Customer influence
Paytm users can use their wallet funds and current deposits until the designated date. Wallet top-ups and associated transactions will stop after February 29 unless the RBI changes its position.
KYC failures
The PPBL is accused of enabling the use of a single PAN for several accounts and of keeping a large number of non-KYC compliant accounts. Transactions that surpass regulatory thresholds may indicate the possibility of money laundering. The vast majority—roughly 31 crore—of the approximately 35 crore e-wallets affiliated with Paytm Payments Bank are inactive, which raises concerns about potential abuse.
The fate of Paytm’s banking activities is in doubt due to increasing regulatory pressure, which could have a significant impact on the company’s position in the market and clientele.
