Crafting Comfort: The Future of Footwear in India
An article by Gagandeep Kohli, CEO of NoStrain India is the world’s second-largest footwear producer, after China, as was previously…
On Wednesday, the Reserve Bank of India (RBI) directed Paytm Payments Bank to cease taking new deposits into its wallets or accounts after February 29, 2024. The regulator informed Paytm Payments Bank, a subsidiary of one of the biggest payment companies in India, that it would not be permitted to accept new deposits, process credit transactions, or provide fund transfers, including the Unified Payments Interface (UPI) service, after February 29.
After February 29, 2024, no additional deposits, credit transactions, top-ups, or withdrawals are permitted in customer accounts, prepaid cards, wallets, FASTags, NCMC cards, etc. According to a press release from central bank chief general manager Yogesh Dayal, except for interest, cashback, or refunds may be credited at any time.
The statement further stated that customers may withdraw or use balances from any of their accounts, including savings bank accounts, current accounts, prepaid cards, FASTags, National Common Mobility Cards, etc., without any limitations, up to the available amount.
Earlier, Indian Highways Management Company (IHMCL), the arm of NHAI, had stopped Paytm Payments Bank from issuing fresh FASTags after it found that Paytm Payments Bank was not following the parameters prescribed in the service-level agreement.
Customers can still use Paytm for digital payments as long as their account is linked to an external bank, as the RBI’s action primarily targets the banking functions of the app. This is an alarming development for the business and will undoubtedly impact its current clientele. We should wait for the official statement from the company, though. Paytm’s (One 97 Communication) short- to medium-term stock price is also anticipated to be impacted by this development. The decision will affect the profit of INR 300-500 cr annually.
“RBI’s actions directly affect the wallet industry and merchant payment business profitability, which can have a 20–30% impact on EBITDA. Because of worries about the group’s reputation, we see a much more significant impact. If lending partners reduce or limit their exposure, the lending business, which accounts for less than 20% of revenues, may suffer greatly. According to Jefferies, these force us to reduce our FY25–26 EBITDA projections by 45%, which will further postpone profitability.
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