RBI Blocks Paytm Bank From Accepting New Customers

India’s central bank has blocked Paytm Payments Bank from welcoming new customers pending an audit of its IT systems, according to a press release Friday (March 11).

“This action is based on certain material supervisory concerns observed in the bank,” the Reserve Bank of India (RBI) said.

Paytm Payments Bank began operating in November 2017 and processes the transactions for Paytm, Anand Dama, an analyst at Emkay Global Financial Services Ltd., said in a Bloomberg report.

Dama added that while the RBI hasn’t placed an embargo on Paytm’s processing business, the move is still a negative for the company, which has struggled since its initial public offering (IPO) in November of last year.

Read more: Paytm Sees Bigger Losses as It Reels From IPO Fallout

Paytm parent One 97 Communications Ltd. raised $2.5 billion in the IPO, only to see a 27% drop following its debut. According to Bloomberg, Paytm’s stock is now down almost 64% from its issue price of 2,150 rupees.

One 97 reported a loss of $104 million, or 7.8 billion rupees, for the December quarter of 2021, compared with a loss of 4.74 billion rupees ($62 million) the previous quarter. However, the company’s revenues rose 34%, reaching 14.6 billion rupees ($191 million).

The company recently formed a partnership with credit company Fullerton India to offer lending products. The collaboration will offer Paytm Postpaid, the company’s buy now, pay later (BNPL) product, to more customers in conjunction with Fullerton’s scale and capability for deep risk assessment.

See also: Paytm, Fullerton, Partner on Consumer Lending

The two companies have also said they plan to expand their offerings and provide digitally-oriented personal loans, issued with Paytm tech and Fullerton’s pan-India reach.

“We have seen great adoption of the lending products among consumers and merchants on our platform,” said Bhavesh Gupta, CEO of Paytm Lending. “We believe that there is a massive opportunity to provide access to credit to merchants in small cities and towns.”