Crisis timeline: Here is what has happened so far at Paytm Payments Bank

Paytm shares are down 33 percent for the past year.

On January 31, the Reserve Bank of India (RBI) imposed major business restrictions on Paytm Payments Bank Ltd (PPBL), including a bar on accepting fresh deposits and credit transactions after February 29.

The central bank later extended the deadline to March 15.

Here is how the events involving PPBL unfolded in recent weeks.

January 31: The RBI asks PPBL to stop accepting deposits and halt credit transactions or topups in customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024.

The central bank said a Comprehensive System Audit report and subsequent compliance validation report by external auditors revealed persistent non-compliance and continued material supervisory concerns at the bank, warranting further supervisory action.

February 1: In an investor conference call, the company management says that its lending partners have requested clarity on the RBI notification.

The company said it is engaging in conversations with the lenders to address their concerns. Paytm has around 11 banking and non-banking financial company (NBFC) partners that lend to its customers through their platform.

Also read: Paytm to resume lending platform provider operations from first week of March, say sources

February 4: The Confederation of All India Traders (CAIT) issues an advisory asking brick-and-mortar businesses to switch from Paytm to other payment applications.

“The RBI has imposed certain restrictions, prompting CAIT to recommend that users take proactive measures to protect their funds and ensure uninterrupted financial transactions. Large number of small traders, vendors, Hawkers and women are making payments through Paytm and as such RBI restrictions on Paytm could lead to financial disruptions for these people,” CAIT wrote in the February 4 advisory.

The association, which largely represents brick-and-mortar shops, urged traders to act promptly to mitigate any adverse effects on their financial operations.

February 8: RBI Governor Shaktikanta Das, while addressing the monetary policy press conference, says all of the regulator’s actions are driven by the need to ensure systemic stability and protect depositors’ and customers’ interests.

“These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success,’ Das said. “We have noted all these questions and clarifications which have been sought from us and based on that, we will be issuing a FAQ sometime next week,” he added.

February 9: The board of Paytm backer One97 Communications Ltd forms a panel headed by N. Damodaran, a former chairman of market regulator Securities and Exchange Board of India, to advise Paytm Payments Bank Ltd on compliance and regulation.

The committee, led by Damodaran and comprising two other members, would work with the board of One97 Communications to strengthen compliance and regulatory matters, the company informed the exchanges.

The other two members of the committee are M.M. Chitale, a former president of the Institute of Chartered Accountants of India (ICAI) and former governing Council Member of the Banking Codes and Standards Board of India, and R. Ramachandran, a former Chairman and Managing Director of Andhra Bank.

February 12: RBI Governor Shaktikanta Das says that the central bank will not review the actions it has taken against Paytm Payments Bank.

“Let me be very clear that there is no review of the action taken against Paytm Payments Bank. The FAQ will deal with customer interest issues,” the RBI chief declared. Das added that the business restrictions imposed on Paytm Payments Bank were a specific issue and there was no need to worry about the entire system.

February 14: One97 Communications, in a clarification issued to exchanges, says the Enforcement Directorate has “over time” asked for certain documents, which the company has provided.

The company issued the clarification following media reports that the Enforcement Directorate had filed a case against the company over alleged FEMA violations.

“One 97 Communications Limited, its subsidiaries and its associate, Paytm Payments Bank Limited, have over time been receiving notices and requisition for information, documents and explanations from the Authorities, including Enforcement Directorate (ED), with respect to the customers that may have done business with the respective entities, and provided the required information, documents and explanations to the Authorities,” the company said.

February 16: The RBI issues its FAQs on the Paytm issue and extends the deadline for Paytm Payments Bank Ltd (PPBL) to stop accepting fresh deposits and credit transactions to March 15 from February 29, as announced earlier.

The FAQs suggest that Paytm get a new QR code linked with other banks’ accounts in order to use Paytm’s soundbox and POS terminal services after March 15.

The document also recommends that customers of Paytm Payments Bank make alternative arrangements with another bank before March 15 for salary credit.

Later that day, Paytm announced a partnership with Axis Bank for the settlement of merchant payments. The company issued a release stating that One97 Communications has shifted its nodal account to Axis Bank via an escrow account.

The shift of the nodal account to Axis Bank will ensure seamless merchant settlements, as before, the release from One97 Communications added.

Also read: After Axis Bank, HDFC and Yes Bank submit TPAP application for Paytm UPI business

February 23: The RBI says it has advised the National Payments Corporation of India (NPCI) to examine a request by One97 Communication Ltd (OCL) to become a Third-Party Application Provider (TPAP) for the UPI channel, for continued operation of the Paytm UPI app.

The central bank added that in the event of NPCI granting TPAP status to OCL, it may be stipulated that ‘@paytm’ handles should be migrated in a seamless manner from Paytm Payments Bank to a set of newly identified banks, to avoid any disruption.

“No new users are to be added by the said TPAP until all the existing users are migrated satisfactorily to a new handle,” the RBI said.

For seamless migration of the ‘@paytm’ handle to other banks, the NPCI may facilitate certification of 4-5 banks as Payment Service Provider (PSP) Banks, if they had demonstrated capabilities to process high-volume UPI transactions, the central bank added.

This would be in line with NPCI norms on minimising concentration risk, the RBI added.