Paytm’s Lifeline: Morgan Stanley’s INR 244 Crore Investment

After the jolt from the RBI, Paytm got respite when Morgan Stanley bought shares worth ₹244 crores. The RBI had put several services offered by Paytm Bank on hold after coming across several irregularities.

On Friday, financial services giant Morgan Stanley purchased shares worth ₹244 crores from Paytm’s parent company, One97 Communications. With this investment, Morgan Stanley acquired a 0.8% stake in the company. The shares were acquired via an open market transaction by Morgan Stanley, through its affiliate, Morgan Stanley Asia (Singapore) Pte – ODI. The entity purchased the shares on the National Stock Exchange (NSE), and each share was presently valued at ₹487.20, adding up to ₹243.60 crores.

Following the RBI action, the shares of the money transfer platform crashed, and in 48 hours, the values tanked by 36%. The RBI had cracked its whip and directed Paytm Payments Bank Ltd (PPBL), an associate of Paytm, to stop accepting deposits or top-ups in its accounts, wallets, and other instruments from March 1.

It is reported that One97 Communications Ltd (OCL) holds 49% of shares in Paytm Payments Bank, while the majority 51% is held by Vijay Shekhar Sharma, founder of One97 Communications. Unconfirmed reports also talk about the RBI revoking the license of Paytm Payments Bank as early as next month.

RBI Imposes Restrictions on Paytm Bank Due to Irregularities, License at Risk

The RBI, in its investigations, found that there were some irregularities, which included abuse of customer documentation rules and non-disclosure of material transactions. The latest actions have been initiated by the RBI to protect the interests of the depositors, and a final decision could be forthcoming as early as February 29.

Paytm Bank has a long history of not adhering to RBI regulatory guidelines despite repeated warnings. Among the charges that have been stacked against Paytm Bank include:

• Not adhering to licensing regulations
• Breach of day-end balances in customer accounts
• Maintaining business contacts with its group entities, One 97 Communication Ltd. – OCL
• Serious KYC violations
• Serious KYC AML (anti-money laundering) violations

RBI later observed that despite repeated reminders to the bank to address these lacunae, nothing was done. Even the compliance submitted by the bank was found to be inadequate or incomplete. This forced RBI to put in supervisory restrictions and also appointed an external auditor to complete a comprehensive system audit.

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