Paytm Share Price Drops 8% Following RBI's Reversal of Paytm Payments Bank License
Paytm Share Price Plunges 8% as RBI Cancels Payments Bank License
Shares of One97 Communications, the parent company of fintech Paytm, experienced a significant decline of up to 8% in early trade on Monday, 27 April, following the Reserve Bank of India's (RBI) decision to cancel the license of Paytm Payments Bank Ltd (PPBL). This development comes more than two years after the RBI restricted Paytm's core business activities.
The Paytm share price hit a day's low of ₹1055.25 on the BSE, resulting in a loss of nearly ₹6,000 crore in investor wealth. The company's market capitalization tumbled to close to ₹67,500 crore, down from ₹73,427 crore on Friday.
The RBI announced the cancellation of PPBL's license, effective from the close of business hours on Friday, citing violations of rules. The central bank stated that Paytm Payments Bank has sufficient liquidity to repay its entire deposit liability upon winding up. The RBI added that the affairs of the bank were conducted in a manner detrimental to its own interests as well as its depositors.
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| RBI Action | Paytm's Response |
|---|---|
| Cancellation of PPBL's license | Winding-up of PPBL |
| Effective from 27 April | Approved winding-up of PPBL over the weekend |
| Citing violations of rules | Assured shareholders and investors that winding-up will not impact business or financial conditions |
In response to the RBI's action, Paytm assured its shareholders and investors that the winding up of PPBL will not have any material impact on its business or financial conditions. The company also approved the winding-up of PPBL over the weekend.
Despite the RBI's action, Bernstein has reaffirmed its confidence in Paytm, stating that the recent development around Paytm Payments Bank Limited will have no impact on Paytm's business. The firm has maintained an 'Outperform' rating with a price target of ₹1,500. In its latest note, Bernstein said that the regulator's decision to cancel the payments bank license is an incremental development, as Paytm had already created a clear separation between the payments bank and the parent company, especially after the regulatory action in early 2024.
Investor Takeaway
Investors should be cautious of the potential impact of RBI's decision on Paytm's business and share price.
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