Paytm Shares Slump as RBI Bars Payments Bank From Taking on New Customers

On Monday, the Reserve Bank of India barred Paytm Payments Bank from onboarding new customers due to a data violation. The bank had allowed customer data to flow to servers abroad in contravention of RBI rules, and also failed to properly verify its customers. This is a huge setback for Paytm Payments Bank, which has been struggling to gain market share against more established players like HDFC Bank and State Bank of India.

The Reserve Bank of India has found that Paytm Payment Bank’s servers are sharing user information with China-based entities which indirectly own a stake in this bank.

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“Paytm Payments Bank is proud to be a completely homegrown bank and complies with all rules on data localization. All of the company’s information resides inside India, where it’s safe.” A Paytm Payments Bank spokesperson said on the recent Bloomberg report alleging Paytm Payments Bank for leaking data.

Paytm Payments Bank is a joint venture by Paytm and its founder Vijay Shekhar Sharma. The bank has shared from China’s Alibaba Group Holding and its affiliate, Jack Ma’s Ant Group.

On Friday, the RBI barred Paytm Payments Bank from adding more customers. They’ve cited “material supervisory concerns”. The bank was directed to appoint an IT audit firm for a system audit of its IT system.

Paytm is a popular mobile payments platform in India with over 300 million wallets and 60 million bank accounts, according to their website.

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Meanwhile, On Monday, the share price of Paytm’s parent company One 97 Communications fell by 12% to Rs 685 per share. This is nearly 70% lower than the company’s initial public offering (IPO) price of Rs 2,150 per share.