Stock Downturn
Paytm’s share price faced a relentless downward spiral, plummeting by 20% for the second consecutive session. Opening at ₹487.05, it hit the lower circuit, continuing the previous day’s decline from ₹608.80. The extended sell-off followed regulatory actions by the Reserve Bank of India (RBI) concerning Paytm Payments Bank (PPBL).
RBI’s Regulatory Move
On January 31, the RBI imposed restrictions on PPBL based on a system audit report and subsequent compliance validation by external auditors. The central bank prohibited PPBL from accepting deposits or top-ups in any customer account, wallets, or FASTags after February 29. Citing section 35A of the Banking Regulation Act, 1949, the RBI mandated the termination of Nodal Accounts of One97 Communications and Paytm Payments Services Ltd. without delay.
Paytm’s Response
In response to the RBI’s directives, Paytm pledged immediate steps to comply, anticipating a potential annual EBITDA impact ranging from ₹300 to 500 crores. The company affirmed its commitment to enhance profitability despite the regulatory setbacks.
Strategic Shift
One 97 Communications (OCL), Paytm’s parent company, disclosed plans to collaborate with alternative banks instead of PPBL. Emphasizing an ongoing partnership with other banks for the past two years, OCL announced an expedited transition, exclusively engaging with other bank partners. OCL and PPSL are actively transferring the nodal account to alternative large commercial banks, aligning with the RBI’s February 29 deadline.
Financial Outlook
While Paytm acknowledges the potential financial implications, it remains resilient in steering toward improved profitability. The company’s strategic shift and alignment with other banks underscore its determination to navigate the challenges posed by the regulatory landscape.
Conclusion
As Paytm grapples with the repercussions of the RBI’s restrictions, the company’s swift response and strategic realignment signify its commitment to adapt and endure. The evolving situation prompts close scrutiny of Paytm’s future moves in the face of regulatory constraints.*
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