Shares of Paytm plunged 10% on Monday, the third consecutive session of declines, touching an all-time low of 438.35 Indian rupees (or $5.28) after the RBI’s clampdown final week seems to have had a extra in depth impression than beforehand anticipated.

The buying and selling was halted after Paytm’s shares fell 10%, the factitious restrict placed on its each day commerce by the native exchanges. Even as Paytm initially anticipated RBI’s choice to have a most annual impression of $60 million to its enterprise, the monetary companies agency has shed about $2.5 billion in its market cap in three days, or greater than 40% of its worth since Wednesday shut. (Paytm’s market cap on Monday stood at $3.35 billion, under the $3.4 billion valuation at which it raised capital from Ant Financial in 2015 and much under its IPO valuation of $20 billion. More on numbers here.)

The Reserve Bank of India (RBI) final week widened its curbs on Paytm’s Payments Bank, which processes transactions for Paytm, barring it from providing many banking companies, together with accepting contemporary deposits and credit score transactions throughout its companies. In response, Paytm initially stated it is going to terminate business with its affiliate and search partnership with different banks.

However, uncoupling Paytm from its affiliated Paytm Payments Bank seems to engender further difficulties, each technical and perceptual.

Shares of ubiquitous monetary companies agency Paytm, which went public in 2021. Image/Data: Yahoo Finance

TechCrunch first reported final week that the RBI is contemplating canceling Paytm’s Payments Bank license. In early 2018, when Paytm acquired the Payments Bank license — which permits the holder to supply clients a financial savings account of as much as $2,400 — it needed to give up its PPI license, the allow required to function the pockets enterprise.

Paytm Payments Bank homes greater than 330 million pockets clients and Paytm can not transition them to a special banking accomplice till the central financial institution returns the agency its PPI license. And it’s unclear if the central financial institution — which has been uncharacteristically strong-worded in its penalty order on Paytm — will make any concessions by the deadline (February 29). Indian each day Hindu Businessline reported on Sunday that Paytm is trying to sell the wallet business.

And that isn’t the one different license at stake. As Bengaluru-based fintech investor Osborne Saldanha adds:

The apparent, direct impression is that Paytm’s fee banking operations can be halted till RBI releases additional directions. It is nevertheless unclear if RBI will permit Paytm to ever resume fee banking operations even put up compliance with RBI’s necessities because the notification does state any remedial clauses. It’s completely doable that RBI might cancel Paytm’s fee banking license altogether. If that occurs, bear with me as I’m not in a position to conclusively decipher, but it surely appears Paytm may not actually have a fee aggregator license, because the fee aggregator license would have resided within the fee financial institution license and Paytm’s utility for a fee aggregator license was returned by RBI.

In its notification final week, the RBI stated Paytm’s “persistent” noncompliance with an earlier order — from March 2022, when the RBI ordered Paytm to cease including clients to Payments Bank — raised supervisory considerations and warranted additional actions. The RBI stated an audit discovered the situations of noncompliances, however didn’t go into particulars.

The native media reported final week that Paytm Payments Bank was riddled with points equivalent to money-laundering and that India’s crime-fighting company Enforcement Directorate was probing the agency. Paytm declined (PDF) that the ED was conducting any investigation, and in a townhall with workers on Saturday, Paytm’s senior executives assured that the problems reported in media have been “old” and had been fastened “long back,” TechCrunch first reported.

As we try to know the complete extent of the potential injury from the RBI’s preliminary ruling to Paytm, the corporate is already starting to bleed clients and retailers. As Macquarie analyst Suresh Ganapathy identified on an analyst name final week, many Paytm clients are already harboring the idea that Paytm is defunct.

“We anticipate this to dent Paytm’s consumer brand credibility that could drive market share losses in segments Paytm dominated in the past,” JPMorgan analysts stated in a notice final week.

The ongoing episode with Paytm can also be shaking the arrogance of traders within the Indian fintech market. The RBI has launched a sequence of regulatory adjustments — or clarifications — within the final three years and fintech as a sector was already changing into hostile for a lot of VCs.

“I believe this action against Paytm is precedent-setting, harsh and impacts the broader financial services ecosystem in India. I don’t remember the last time RBI canceled the license of a bank for reasons other than adequate capital requirements,” Saldanha added.

Bipin Singh, co-founder of monetary companies agency MobiKwik, defended the RBI’s rationale: “Having worked with the regulator closely over the last decade or so, I can say conclusively that RBI is neither against innovation nor against fintechs. If they were, we wouldn’t have the huge fintech ecosystem in India today. Compliance, however, is not negotiable,” he tweeted.