Reserve Bank of India has issued a direction that says that Paytm Payment Bank to stop adding any new customers due to small finance bank regulation issues. Macquarie in its report said there will be no effect on the business of the company. But there is a high possibility that the vision of Paytm to convert Payment Bank into Small Finance Bank license might hit a bumpy road.
The report said, “We do not expect the impact on business for Paytm from this ban to be substantial, since Paytm has already onboarded a very large customer base onto the payments bank. However, we would expect a significant impact on Paytm’s brand and customer loyalty going forward.”
Experts say that, “This is not a huge impact on business as the transaction volumes are not dependent on new customers. But this comes at a bad time as it reflects a lack of confidence from the regulator. That will not work in favour at a time when Paytm is planning to seek a new licence.”
According to Macquarie the recent ban will reduce the chances of fintech giant to get an upgrade to become small finance bank. In May Paytm will complete five years and was supposed to apply for the license then.
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Reserve Bank of India banned Paytm Payment Bank from adding new customers due to gaps in technology systems which will dent the Soft Bank backed fintech company. Report issued by RBI said, “Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by the Reserve Bank of India (RBI) after reviewing (the) report of the IT auditors. This action is based on certain material supervisory concerns observed in the bank.”
Paytm spokesperson said, “We assure you that the recent RBI direction will not impact our existing customers in any way and they can continue to use our banking services seamlessly … We are taking necessary steps to comply with the directions of RBI and committed to minimize any inconvenience caused to our customers.”
A spokesperson of RBI told ET that, “The RBI action is a result of a series of compliance and regulatory issues with Paytm. These include KYC compliance and also IT related issues. The central bank is very clear that it cannot allow depositors’ money to be exposed to such risks. This action comes after many rounds of communications to Paytm, and it has been taken to pinch them hard so that they comply.”
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