Will Paytm work after February 29? Here's everything you need to know about the RBI clamp down on Paytm Payments Bank

The Reserve Bank of India RBI has taken stringent measures against Paytm Payments Bank restricting the entity from offering additional banking services effective March 2024 The move comes in response to persistent noncompliance issues and supervisory concerns identified in external audit reportsThe RBIs Comprehensive System Audit and subsequent compliance validation revealed significant breaches prompting the central bank to halt Paytm Payments Banks ability to onboard new customers and implement a comprehensive System Audit in March 2022As of February 29 2024 Paytm Payments Bank will be barred from accepting deposits conducting credit transactions or facilitating topups in various customer accounts prepaid instruments wallets FASTags and NCMC National Common Mobility Cards However interest cashbacks and refunds may still be creditedWithdrawals or utilization of balances from savings and current bank accounts prepaid instruments FASTags and NCMC should be permitted without restrictions and up to the available balance Nevertheless apart from fund transfers no other banking services BBPOU Bharat BillPay Operating Units and UPI facility should be provided by the bank post February 29 2024The RBI has mandated the termination of nodal accounts of the parent company One97 Communications and Paytm Payments Services by February 29 2024 Settlement of all pipeline transactions and nodal accounts initiated before this date should be completed by March 15 2024 after which no further transactions will be allowedImpact on Paytm usersBanking Operations Shutdown Paytm Payments Bank effectively ceases banking operations unless services are transferred through another bankRisks to Earnings and Valuations Risks include impacts on payments margin potential limitations on lending business winding down of wallet GMV Gross Merchandise Value and significant effects on FasTag GMVAlso read RBI directs Paytm Payments Bank not to onboard new customers after February 29Paytms responsePaytm founder Vijay Shekhar Sharma assured users that the app will continue working beyond February 29 and remains committed to serving in full compliance However challenges in earnings and valuations persist due to the regulatory restrictionsThe founder and CEO of One97 Communications Ltd OCL which owns Paytm brand on social media platform X said the company is committed to serving the nation in full compliance To every Paytmer Your favourite app is working will keep working beyond 29 February as usual Sharma saidRBI has barred Paytm Payments Bank Ltd PPBL from accepting deposits or topups in any customer account prepaid instruments wallets and FASTags among others after February 29 2024OCL holds a 49 per cent stake in PPBL but classifies it as an associate of the company and not as a subsidiaryI with every Paytm team member salute you for your relentless support For every challenge there is a solution and we are sincerely committed to serve our nation in full compliance India will keep winning global accolades in payment innovation and inclusion in financial services with PaytmKaro as the biggest champion of it Sharma saidThe Paytm top management during an earning call on Thursday said they are working on a migration plan for PPBL wallet FASTag etc users with other banksThe company sees the RBI order to have an impact of Rs 300500 crore on its annual operational profit as its customers will not be able to add money to their wallets FASTag etcSeparately the company informed that its offline merchants network offering and device business like Paytm Soundbox EDC QR are not impacted by the Reserve Bank of Indias RBI direction to its associate bankThe fintech company will also continue onboarding merchants to its platformThe Paytm Payment Gateway business online merchants will continue to offer payment solutions to its existing merchants Other financial services such as loan distribution insurance distribution and equity broking are also not in any way related to Paytms associate bank and are expected to be unaffected by this direction the company saidPaytm said that the RBI order also does not impact user deposits in their savings accounts wallets FASTags and NCMC National Common Mobility Card accounts and they can continue to use the existing balancesRBI has ordered PPBL to settle all pipeline transactions and nodal accounts in respect of all transactions initiated on or before February 29 2024 by March 15 2024 and no further transactions would be permitted thereafterSharma during the call had said that RBI order is a big speed bump and shared that he could not understand the trigger for the move and he was not aware of the exact nuance that triggered the orderOn behalf of Paytm I can say it is more of a big speed bump but it is something that we believe that with partnership of other banks and capabilities that we have already developed we will be able to see through in the next few days or quarters as the case will be he had said With additional reporting from PTI