Shares of One97 Communications, the parent company of fintech platform Paytm, tumbled as much as 8% in early trade on Monday, 27 April, following the Reserve Bank of India's decision to cancel the license of Paytm Payments Bank Ltd. According to reports from Mint, this cancellation represents a significant escalation from the RBI's previous restrictions on the company's core business activities, which had been in place for more than two years. In an exchange filing released after market hours on Friday, Paytm announced that the RBI has effectively cancelled Paytm Payments Bank's banking license, leading the company to announce it would shut down the subsidiary. The stock opened at ₹1,084.95 and touched an intraday low of ₹1,051.10, with volumes reaching over 67.57 lakh shares in under 30 minutes of trade, reflecting the scale of investor reaction to the regulatory news.
The sharp decline in Paytm shares reflects significant investor concerns over the regulatory action against the payments bank subsidiary. As reported by Mint, the 8% drop in early trading demonstrates the market's immediate reaction to the news of the license cancellation. The stock is now 22% below its 52-week high of ₹1,381.80, indicating substantial investor anxiety about the regulatory developments. However, market sentiment shows some resilience with the order book nearly balanced at 52% buy versus 48% sell, suggesting that some bottom-fishers have stepped in even as sellers dominate price action. The nearly balanced order book at current levels of ₹1,074.75 indicates the market is not in full panic mode and the stock appears to be finding tentative support after the initial gap-down.
The RBI's decision to cancel the payments bank license represents a more than two-year regulatory process that began with restrictions on the company's core business activities. According to Mint, this timeline indicates that the central bank had been monitoring Paytm Payments Bank for an extended period before taking the final step of license cancellation. The RBI had first restricted Paytm Payments Bank from onboarding new customers in March 2022 and barred fresh deposits in early 2024, with Friday's cancellation being the culmination of a four-year enforcement timeline. Both Bernstein and Jefferies highlighted that the RBI cited concerns around operations, governance, public interest and licence compliance as the grounds for cancellation, representing a multi-pronged regulatory indictment that goes beyond any single operational failure.
Despite the cancellation of Paytm Payments Bank, the company has assured investors that its core operations remain unaffected. As reported by The Economic Times, Paytm clarified that it does not have any exposure to the associate entity and provides no services in partnership with it. The company stated that Paytm Payments Bank operates independently and that its services including the Paytm app, Paytm UPI, Paytm Gold and all other services offered by its subsidiaries and associated companies such as Paytm QR, Paytm Soundbox, Paytm Card Machines, Paytm Payment Gateway, Paytm Money, will continue to operate uninterrupted. Jefferies confirmed that all core Paytm services continue normally and are unaffected by the licence cancellation, noting that RBI confirmed Paytm Payments Bank's assets exceed its liabilities, meaning depositors will be made whole through the winding-up process.
Despite the regulatory setback, major brokerages maintain positive outlooks on Paytm's prospects while acknowledging the challenges. Bernstein maintained its 'Outperform' rating with a target price of ₹1,500, acknowledging the licence cancellation as an incremental negative but noting no financial impact since Paytm's investment in the Payments Bank was already fully written off. The brokerage believes the formal closure of the Payments Bank chapter may actually clear the path for approval of an NBFC or PPI licence, which would open entirely new business verticals. Jefferies maintained its 'Buy' rating with a target price of ₹1,350, noting that the company's board was reset with a CEO from IDBI Bank, creating legal and operational firewalls between the parent and subsidiary. The key debate for investors is whether the Payments Bank cancellation removes the last major regulatory overhang or signals that regulatory risk around the parent company itself is not fully resolved.
