RBI Cancels Paytm Payments Bank License; Shares Plummet

Shares of fintech firm Paytm experienced a significant drop of up to 8.37% in intraday trading, reaching a low of ₹1,051.05. This decline followed the Reserve Bank of India’s (RBI) decision to cancel the banking license of Paytm Payments Bank Limited, effective immediately.

The RBI cited that the bank’s operations were conducted in a manner detrimental to public interest, citing concerns over management, governance, and persistent non-compliance with regulatory conditions. Consequently, Paytm Payments Bank is prohibited from conducting any further banking activities, and the RBI intends to initiate winding-up proceedings.

Despite the sharp market reaction, several brokerage firms maintained a positive outlook on Paytm. Analysts suggest that the direct financial impact on the listed entity may be limited, as the payments bank business had already been ring-fenced. Bernstein and Jefferies reiterated ‘Outperform’ and ‘Buy’ ratings, respectively, with price targets of ₹1,500 and ₹1,350, noting that the core services of Paytm continue to operate and the move could potentially open avenues for Paytm to seek an NBFC or PPI license.

Goldman Sachs also maintained a ‘Buy’ rating but adjusted its target price downwards to ₹1,400, acknowledging the incremental negative impact while emphasizing the limited direct financial exposure due to prior ring-fencing measures. Customer and merchant sentiment remains a key risk factor to monitor.

The RBI’s action stems from a series of regulatory restrictions imposed on Paytm Payments Bank since 2022, including barring it from onboarding new customers and accepting fresh deposits. While Paytm has secured a TPAP license from the National Payments Corporation of India and a payment aggregator license for its subsidiary, the revocation of the banking license marks a significant regulatory setback.