Paytm CEO Vijay Shekhar Sharma Meets RBI To Discuss Regulatory Concerns

Last Wednesday, the RBI directed Paytm Payments Bank to stop the acceptance of new deposits in its accounts and digital wallets, effective from March, citing regulatory non-compliance

Paytm is seeking clarity from the central bank regarding the transfer of licenses for its wallets business and digital highway toll payment service, Fastag. ( Image Source :Getty )

Vijay Shekhar Sharma, the chief executive officer (CEO) of Paytm, engaged in discussions with the Reserve Bank of India (RBI) on Monday, seeking to address regulatory concerns following recent restrictions imposed on its banking affiliate, sources familiar with the matter told news agency Bloomberg.

Last Wednesday, the RBI directed Paytm Payments Bank to stop the acceptance of new deposits in its accounts and digital wallets, effective from March, citing supervisory concerns and regulatory non-compliance. These actions negatively impacted Paytm's shares.

Sources privy to the discussions revealed that Paytm is actively working towards resolving the RBI's regulatory concerns and has requested an extension beyond the February 29 deadline.

In addition to addressing immediate concerns, Paytm is seeking clarity from the central bank regarding the transfer of licenses for its wallets business and digital highway toll payment service, Fastag. Despite the talks, neither Paytm nor the RBI has provided official comments regarding the meeting.

The regulatory actions have caused significant losses for Paytm shareholders, amounting to $2.5 billion as of Monday. The impact is particularly concerning as Paytm Payments Bank is integral to the functionality of the popular digital payments app, which competes with platforms like Walmart's PhonePe and Google.

On Tuesday, Paytm's stock reached a record low following reports that India's federal anti-fraud agency is investigating potential violations of foreign exchange rules by platforms associated with the company.

A spokesperson for Paytm denied any wrongdoing, labelling the allegations as "unfounded and factually incorrect." Despite the initial setback, Paytm's shares rebounded by as much as 8 per cent later in the day, settling at a 4.2 per cent increase, with a closing price of Rs 457.

Analysts at Bernstein acknowledged the regulatory challenges but deemed the earlier stock plunge as an overreaction. They anticipate Paytm to navigate through operational changes successfully, albeit with lasting impacts on investor perceptions.

Bernstein revised its target price for Paytm's stock to Rs 600 from Rs 950 but maintained an outperform rating, reflecting confidence in the company's ability to manage regulatory risks and adapt to operational changes.