April 27 (Reuters) – Shares of payment and financial services provider Paytm fell as much as 8.4% on Monday, their biggest intraday drop in over three months, after India’s central bank last week cancelled the banking licence of Paytm Payments Bank Limited.
The stock later recouped some losses to trade down about 3.5%.
The Reserve Bank of India’s decision came two years after the regulator imposed business curbs over violations, ordering the bank to stop accepting fresh deposits due to what it said at the time was non-compliance with rules, including around customer due diligence, use of funds, and technology infrastructure.
“No useful purpose or public interest would be served by allowing the bank to continue,” the RBI said, while cancelling the licence.
It added that “the general character of the management of the bank is prejudicial to the interest of depositors as also the public interest”, when announcing the cancellation of its licence.
On Saturday, the board of parent company One 97 Communications approved the winding up of the payments bank.
“The company wishes to assure its shareholders and investors that the winding-up of PPBL (Paytm Payments Bank Ltd) and the consequential cessation of the associate relationship are not expected to have any material impact on the business, operations, or financial condition of the Company,” One 97 Communications said.
While Paytm’s current business is not affected by the licence cancellation, analysts at BofA Securities said it could increase regulatory risks for the company.
“We see risks that in the future it may become harder for Paytm to obtain any potential licences from RBI,” they said.
