Indian fintech giant loses over $2bn market cap amid regulatory crackdown
The Indian government may initiate a formal probe into the operations of one of the country's largest digital payment firms, Paytm, The Economic Times reported on Wednesday. The development comes a week after the regulator and country's central bank, the Reserve Bank of India (RBI), ordered Paytm to stop offering its core services from February 29, citing possible violations of anti-money-laundering provisions.
The report suggests that the Enforcement Directorate, a government agency responsible for fighting financial crimes, may initiate an investigation into the transactions that raised money-laundering concerns at the RBI.
Paytm has lost over $2 billion in market value after the regulator’s move against it. Its market capitalization on Wednesday stood at around $3.4 billion. While its stock showed signs of recovery, after a three-day fall in which Paytm shares plunged over 40%, uncertainty lingers over the future of its instant payment service.
The company has rejected the reports of an impending official investigation, describing them as “factually incorrect and without foundation.”
Nevertheless, the RBI last week barred Paytm Payments Bank from accepting deposits or top-ups in any customer account and/or offering prepaid instruments, and wallets, due to “persistent non-compliances and material supervisory concerns.” The regulator, however, has allowed the balance amounts to be withdrawn or used by customers without any restrictions.
Paytm’s parent company, One97 Communications Ltd, known as one of the pioneers of India’s instant-payments industry, earlier said it was taking immediate “steps to comply with RBI directions” in the wake of the directives.
Vijay Shekhar Sharma, founder and chief executive officer of Paytm, met Finance Minister Nirmala Sitharaman on Tuesday amid the ongoing crisis. During their brief meeting, Business Today reported, Sharma was told to “directly deal” with the regulator. Sharma is said to have been inspired by Chinese entrepreneur Jack Ma and envisioned his platform as an Indian alternative to the Chinese Alipay.
Paytm is one of the most prominent success stories of India’s fintech boom and has more than 300 million users, according to its website. In its 2023 annual report, Paytm projected growth to 500 million users and 100 million merchant accounts.
Indian Prime Minister Narendra Modi, whose government continues to pivot towards digital payment systems, has been vocally supportive of the startup giant for enabling easier transactions, especially in rural India.
The Unified Payments Interface (UPI), an Indian instant payment system developed in 2016 by the National Payments Corporation of India (NPCI), is now accepted in over 40 countries. Most recently, France approved using UPI after President Emmanuel Macron visited the South Asian nation.