<p>Paytm Payments Bank Limited (PPBL) activities were limited by the Reserve Bank of India (RBI) last month due to “persistent non-compliance and continued material supervisory concerns in the bank,” according to the audit report. Additionally, the RBI requested that the PPBL cease taking on new clients and to stop processing deposits, credit requests, and top-ups for client wallets, accounts, and FASTags.</p>
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<p>Since the RBI’s decision, Paytm stocks have fallen by more than 40% in three trading days. The RBI reaffirmed its position on Paytm during the news conference on Thursday, emphasizing that they had had enough of opportunity to resolve the matter but had been unable to do so.</p>
<p>Vijay Shekhar Sharma, the founder of Paytm, has asked for an extension of the deadline of February 29 in addition to a transition plan as part of his continuous efforts to comply with RBI regulations.</p>
<p><strong>HOW IS MONEY MADE BY PAYTM?</strong><br />
Customers use credit cards, digital wallets, net banking, and the Unified Payments Interface (UPI) to make payments on the app. According to Moneycontrol.com, in Q3 of FY24, it received 38% of its income from processing payments for merchants and 21% from processing payments for customers.</p>
<p>Paytm also makes advantage of its user base to market and offer additional services including cloud services, movie and travel tickets, and brokerage. The program provides small company financing and Paytm commerce services to retailers looking to boost sales via gift cards and tickets.</p>
<p>Analysts surmise that cloud and e-commerce services comprise Paytm’s most lucrative commercial ventures.</p>
<p><strong>IMPACT OF RBI RESTRICTIONS ON PAYTM</strong><br />
Organizations are not permitted to directly engage in lending operations, according to RBI standards for regulating payments banks. The governing structure of PPBL is the other problem. Vijay Shekhar Sharma holds the remaining 49% of PPBL, with Paytm holding the other 49%. At first, One97 Communication (OCL) said that PPBL is managed independently by its board and management.</p>
<p>The news outlet NDTV Profit recently discovered that more than 1,000 accounts had the same PAN associated with them. so raising questions over money laundering.</p>
<p>33 crore Paytm wallet accounts are owned by PPBL; hence, wallet funds are maintained in the PPBL escrow account. This can’t stay in PPB, Macquaire said, citing a source from MoneyControl.com. Customers of Paytm will have to take money out of their wallets and won’t be able to add more if the company can’t find another bank to host it on. The wallet industry may collapse as a result, according to Moneycontrol.com.</p>
<p><strong>TRAIL TO TRANSITION</strong><br />
Similar to Google Pay and Amazon Pay, it may remain a UPI third-party application; however, this is contingent upon Paytm and the National Payments Corporation of India (NPCI) finding a bank that is prepared to host its nodal account.</p>
<p>According to Moneycontrol.com, PPBL would need a new sponsor bank if it loses its license. This bank will be accountable for Paytm’s conduct.</p>
<p>It went on to state that it plans to increase the number of third-party bank relationships it has with other banks for merchant acquisition services, which provide the necessary infrastructure to acquire merchants and facilitate them access to payments.</p>
<p>The Hindu reports that Bhavesh Gupta, President and Chief Operating Officer (COO), said that the changeover would occur in three phases. The first step would be to locate a bank partner who is interested in integrating with the required Paytm ecosystem. Assessing the consequent business viability comes in second, and simplifying the account-to-account movement comes in last.</p>
