Paytm Payment Bank's Licence At Stake, More Trouble for The Company: Source

Paytm, which is in news in the past few days, may get another hit after February 29 as its Payment Bank's licence is now on the Reserve Bank of India's radar, according to a source with direct knowledge who confirmed media reports about the company's irregularities.

Paytm has gotten itself into trouble for all the wrong reasons and the central bank has discovered fake accounts without KYC verification apart from other compliance issues with the digital-payment company, according to media reports.

The RBI has been sending several warnings regarding this to the fintech giant and Paytm has ignored them for several months now, the source added.

One97 Communications, Paytm's parent company who was speculated to sell the wallet business will not be able to do so as recent restrictions on its activities by the RBI does not allow transfer of business, according to recent media reports.

The same PAN has been linked to over 100 customers in many cases and in a few cases for more than 1,000 customers, the RBI found. The total amount of transactions in some accounts were crores of rupees, much beyond regulatory limits in minimum KYC pre-paid means raising money laundering concerns, according to a CNBC-TV18 report.

Vijay Shekhar Sharma, CEO of Paytm, is facing massive backlash after the central bank of India ordered Paytm's banking arm to pause most of its operations due to "persistent non-compliances" and "supervisory concerns."

Paytm has lost more than half of its market value triggered by the regulatory action and investors confidence on the company has been shaken. It is yet to be confirmed if the RBI will go ahead and cancel Paytm Payment Bank's licence after February 29.

Paytm' Payment Bank was launched in 2017 after the demonetization of currencies took place in 2016. This operation of the company was successful as more and more people, specially in rural India chose to perform their monetary transactions through Paytm.

But several irregularities through the years have pushed Paytm to where it is today.

The RBI also found a remarkably overflowing number of dormant accounts which are inclined to have been used as mule accounts.

There were also concerns relating to money laundering arising from deficiencies in the KYC processes and lack of transaction monitoring system of the bank.

As Paytm's valuation takes a blow, investors become increasingly sceptical about any swift and clean resolution to the recent regulatory challenges. With bearish sentiment, investors withdrew $2 billion from Paytm, the markets now reflect a lack of confidence in the company's ability to overcome the current crisis.

That is despite Sharma's reassurances to its employees and investors that the Paytm app will continue to function, concerns linger about potential business disruptions, given the central role of Paytm's banking arm in supporting the payments app.