© Reuters. FILE PHOTO: A worker adjusts a hoarding of Paytm, a digital payments firm, in Ahmedabad, India, January 31, 2019. Picture taken January 31, 2019. REUTERS/Amit Dave/File Photo
By Siddhi Nayak
MUMBAI (Reuters) -Paytm Chief Executive Vijay Shekhar Sharma met the Indian central bank on Monday to discuss plans to address regulatory concerns, two sources with direct knowledge of the talks said on Tuesday, days after the regulator imposed curbs on its banking affiliate.
The Reserve Bank of India (RBI) told Paytm Payments Bank last Wednesday to stop accepting new deposits in its accounts and its popular digital wallets from March, citing supervisory concerns and non-compliance of rules, which hit Paytm shares.
“Discussions are on about addressing RBI’s regulatory concerns, and the company has sought an extension of the Feb. 29 deadline,” said one of the sources.
Paytm has also been seeking clarity from the RBI regarding transfer of license for the wallets business and digital highway toll payment service Fastag, the source said.
“The RBI heard Paytm out without making any commitments,” a second source said.
Paytm and the RBI did not immediately respond to Reuters’ request for comment.
As of Monday, Paytm shareholders had lost $2.5 billion amid concerns of the impact to Paytm’s business as Paytm Payments Bank powers most features of the popular digital payments app, which competes with the likes of Walmart (NYSE:)’s PhonePe and Google (NASDAQ:).
The stock hit a record low early on Tuesday following a Reuters report India’s federal anti-fraud agency was investigating if platforms run by the company have been involved in violations of foreign exchange rules.
A Paytm spokesperson denied any violations of foreign exchange law, calling the allegations “unfounded and factually incorrect.”
However, shares of Paytm later jumped as much as 8% and were last trading up 4.2% at 457 rupees.
Analysts at Bernstein said the earlier plunge was an overreaction.
“While the regulatory action will no doubt have a lasting impact on investors’ assessment of the business model risk and of the management’s ability to handle regulatory risk, we expect the company to successfully execute the operational changes required to overcome the restrictions,” analysts at Bernstein wrote in a note.
Bernstein lowered its target price on the stock to 600 rupees from 950 rupees, but retained an outperform rating.
($1 = 83.0325 Indian rupees)
