Paytm Payments Bank cleared of initial forex violation charges, but KYC lapses found. Stock rebounds slightly after RBI extends wind-down deadline. Read for details and analyst outlook.
An investigation into possible foreign exchange violations at Patym Payments bank by the Enforcement Directorate has not yet found any breaches, a government source directly aware of the matter said on February 19.
Last week, the Enforcement Directorate announced the investigation into overseas transactions by Paytm Payments Bank, a unit of One 97 Communications, popularly known as Paytm.
Paytm shares have plunged more than 50 percent since the Reserve Bank of India announced on January 31 that Paytm Payments Bank could no longer accept new funds into its accounts or wallet. The rout has eroded around $3.1 billion in shareholders’ wealth.
The investigation has found some lapses related to the know-your-customer rules that verify the profiles of users, said the source.
There were also some issues with a suspicious transaction report not being generated by the bank, the source said, adding that the Enforcement Directorate is still ascertaining whether to bring charges for any potential violations.
The Enforcement Directorate did not immediately respond to a request for comment.
Paytm, on Monday, replied with an earlier statement from last week saying it was providing information to the Enforcement Directorate and other authorities.
One 97 Communication shares rose by the exchange-allowed maximum of 5 percent for a second session on Monday, taking total gains to a little over 10 percent in two days.
Paytm Payments Bank secured a 15-day extension for its wind-down to March 15 from the Reserve Bank of India on Friday.
Also on Friday, Paytm said it signed on a new banking partner, Axis Bank, to try to keep some of its popular products running and survive its current crisis.
Analysts at Bernstein said the deadline extension would help smoothly transfer Paytm Payments Bank accounts and said Paytm’s merchants being able to use the company’s QR codes, soundbox and card machines is a “major positive”.
Citi analysts expect more banking partnerships, like the one with Axis, calling them “significant positives for ongoing business”.
However, Citi kept its “sell” rating on the stock, while Bernstein maintained “outperform.”
Jefferies, however, said it would stop coverage of Paytm until news on regulatory actions “settles”. Two brokerages have dropped coverage in the past month, according to LSEG data.
Now 13 analysts cover Paytm, with five of them recommending selling the stock, compared with none for the past year. The overall average rating, however, is the equivalent of “hold”, per LSEG data.
The median price target on the stock has dropped 31 percent in the past month to 625 rupees. The stock is currently at 358.35 rupees.
Paytm Payments Bank Investigation FAQs:
1. What was the investigation about?
The Enforcement Directorate (ED) investigated Paytm Payments Bank for possible foreign exchange violations after the Reserve Bank of India (RBI) restricted its operations.
2. Did the investigation find any foreign exchange violations?
No, the initial investigation did not find any foreign exchange violations as of February 19, 2024.
3. What did the investigation find?
The investigation identified some issues related to Know-Your-Customer (KYC) rules and a missing suspicious transaction report. Further investigation is ongoing to determine if charges will be filed.
4. How has this impacted Paytm’s stock price?
Paytm’s stock price has fallen significantly since the RBI restrictions, losing over 50% of its value. However, it has seen a slight rebound in the past few days.
5. What are the next steps for Paytm Payments Bank?
The bank has been granted a 15-day extension to wind down its operations until March 15, 2024. It has also partnered with Axis Bank to try to maintain some services.
6. What is the analyst outlook for Paytm?
Analysts’ opinions are mixed, with some recommending selling the stock and others maintaining a hold or outperform rating. The overall outlook is cautious due to the ongoing regulatory actions.
7. Where can I find more information?
You can find more information in the news article you provided or by searching for recent updates on Paytm and the ED investigation.
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