While the benchmark indices are trading in green on Monday, breaking the losing streak of the past three sessions, the stock of Paytm’s parent, One 97 Communications, slipped over 8 percent during the early trade.
The steep decline came in after the Reserve Bank of India on Friday cancelled the banking licence of Paytm Payments Bank, an associate entity of the UPI giant.
As anticipated, the stock of Paytm on Monday opened almost 5 percent lower at Rs 1,090.40 compared to the previous close of Rs 1,147.10 apiece on Friday.
During the early hours of Monday’s trade, it went as low as Rs 1,051.05, with a decline of 8.3 percent.
However, the scrip soon recovered some of the losses but still remained in the negative territory.
The RBI cancelled the banking licence issued to Paytm Payments Bank under Section 22(4) of the Banking Regulation Act, 1949, the banking regulator said in a press release on Friday.
“Consequently, Paytm Payments Bank is prohibited from conducting the business of ‘banking’ as defined in Section 5(b) or any additional business specified under Section 6 of the Banking Regulation Act, 1949 with immediate effect,” it said, while adding that the regulator will make an application for winding up of the bank before the High Court.
The decision for cancelling the licence was taken as the RBI found that the affairs of the bank were detrimental to its interests and its depositors.
The RBI had previously restricted the bank from onboarding new customers with effect from March 11, 2022.
In January and February 2024, certain business restrictions were also imposed, which disallowed any further deposits, credits, and top-ups in existing customer accounts, prepaid instruments, and wallets.
However, the RBI has also assured the users of Paytm Payments Bank that it had enough liquidity to repay its entire deposit liability upon winding up of the bank.
