Understanding RBI directive and Paytm’s season of setbacks

Fintech giant Paytm is stumbling from one bad week to another, a streak that is now in its fourth month and seems far from easing up.

The first crisis was its disastrous public offering in November last year, followed by exits of multiple senior executives a month later. In recent weeks, its stock has plunged to Rs 678 as against the issue price of Rs 2,150.

But the most serious setback came last Friday (March 11) when RBI ordered Paytm Payments Bank to refrain from adding new customers until it completed a comprehensive tech audit. The restriction, the latest in a series of directives against the company, could last for up to six months and significantly impact some operations, said people briefed on the matter.

“It is a harsh move by the regulator, given that the company has been trying to fix issues raised by it for the past three months,” said a senior fintech executive aware of the developments at Paytm.

Industry insiders are comparing the move with the recent ban that prevented HDFC Bank from onboarding new credit card customers. As in most cases, RBI has not detailed the reasons for its action against Paytm. The CapTable, however, has learned from sources what likely went wrong.