Paytm stock is now valued at less than a third of its original offering price and is now trading at a consistently low price. Find out why Paytm stock is collapsing
After the RBI imposed a ban on new customer acquisition on Paytm Payments Bank on Saturday, the company’s shares fell nearly 70% from their all-time high price. To add further, the company’s troubles escalated over the weekend after news broke that founder and CEO Vijay Shekhar Sharma was briefly arrested last month after ramming a senior police officer’s car in the New Capital of Delhi and fled the scene.
A share of 97 Communications Paytm, now valued at less than a third of its initial offering price, plunged to an all-time low on Monday, eventually settling down 13% to Rs 674.80 on the National Stock Exchange. In Tuesday’s opening trade, it was down another 7.12% and is currently trading at Rs 627.75. Today is the second day that Paytm shares continue to see a free fall since the RBI ban. Currently, the stock is trading 68% below its all-time high of Rs 1,961.05, while year-to-date, the stock is down almost 50% percent. The company has lost over Rs 89,185 crore in market capitalization since the IPO.
RBI Bans Customer Acquisition for Paytm Payments Bank
On Saturday, the Reserve Bank of India (RBI) ordered Paytm Payments Bank to stop acquiring new customers with immediate effect, citing “significant oversight issues observed in the bank”. The bank has also been asked to appoint an audit firm to carry out a comprehensive audit of its IT system, the Reserve Bank of India said in a statement. This is the second time Paytm has faced a regulatory ban. In June 2018, RBI made some observations about the company’s processes for acquiring new users, particularly with respect to know-your-customer (KYC) standards.
Paytm on RBI Ban
Responding to the regulatory action taken by the central bank, the Paytm Payments Bank spokesperson said: “The Bank is taking immediate action on the RBI’s decision. PPBL continues to engage with the regulator to address their concerns as much as possible. as soon as possible. Existing PPBL customers can continue to enjoy the benefits of seamless, fully secure and functional digital banking and payment services.
Report on Paytm Alleges China Link
The Bloomberg news agency reported that the RBI or Reserve Bank of India discovered that the company’s servers were sharing information with China-based entities that indirectly hold a stake in payment bank Paytm. Bloomberg, citing sources, said the Reserve Bank of India’s annual inspections found the company’s servers shared information with China-based entities that indirectly hold a stake in Paytm Payments Bank.
Paytm on Data Leak
However, the company denied it on Monday. “Paytm Payments Bank prides itself on being a 100% local bank, fully compliant with RBI’s data localization guidelines. All banking data resides in India,” the company said.
RBI to Punish Paytm?
According to a report by ET, the RBI would set the terms of reference for an independent technology audit of Paytm Payments Bank after the regulator banned new customer onboarding for alleged breaches of customer acquisition regulations and of confidentiality, which could have included a possible flow of data to companies of Chinese origin.
In the coming days, Paytm Payments Bank will submit several names as potential audit candidates to the regulator for its approval, and the regulator may finalize the terms of reference based on its findings which include a number of deficiencies in the meeting with Know Your Client (KYC), ET said citing sources. Paytm Payments Bank is a joint venture between Paytm and Sharma. The Chinese group Alibaba Group Holding Ltd. and its subsidiary, Jack Ma’s Ant Group Co., own shares of Paytm, according to exchange statements.