NEW DELHI: After the Reserve Bank of India (RBI) on Friday barred Paytm Payments Bank (PPBL), which processes transactions for Paytm, from onboarding new customers with immediate effect due to supervisory concerns, a fresh report says that the action was taken after the RBI had found the PPBL’s servers were sharing information with China-based entities that indirectly own a stake in the Paytm Payments Bank.
The other reason for RBI’s decision is said to be not following adequate know-your-customer (KYC) norms. In a report, news agency Bloomberg, citing unnamed sources, has said that data leakage was found in annual inspections by RBI.
The report notes that PPBL, being a regulated financial institution, was required to maintain a so-called service level agreement with its technology vendor that would ringfence the entity from its owners. Paytm is backed by China’s Alibaba Group Holding and its affiliate Ant Group.
PPBL, however, said that the data leak report to Chinese firms is completely false and simply sensationalising. Paytm founder and CEO Vijay Shekhar Sharma in multiple TV interviews said that there is no server of the bank that is not in India.
“All of the Bank’s data resides within the country. We are true believers of the Digital India initiative, and remain committed to driving financial inclusion in the country,” a PPBL Spokesperson said. The spokesperson added that the Bank is taking immediate steps regarding the RBI’s decision and they remain committed to working with the regulator to address their concerns as quickly as possible.
This development had a catastrophic impact on Paytm share prices on the stock exchanges. The stock fell over 12% to close at Rs 680 a piece, falling over Rs 700-mark for the first time. With the current fall, Paytm shares have lost more than two-third of their value when compared with the issue price of Rs 2,150. Similarly, its market capitalisation has fallen below Rs 44,000 crore as against the m-cap of Rs 1.39 lakh crore before the stock hit the exchanges.