Paytm faces a crisis after the RBI gave till February 29 to stop operations
The Confederation of All India Traders (CAIT) has asked traders to switch from Paytm to other payment apps, after the Reserve Bank of India (RBI) ordered Paytm Payments Bank to stop services from February 29 over alleged violations of norms.
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The CAIT in a statement today underscored the importance of risk mitigation for traders, asking them to explore alternative payment apps that are compliant with regulatory guidelines.
CAIT national president BC Bhartia and secretary general Praveen Khandelwal in the statement said the recent restrictions imposed by the RBI on Paytm have raised concerns about the security and continuity of financial services provided by the platform.
To ensure seamless functioning of transactions and safeguard financial assets, both asked Paytm users to switch to other payment apps, or consider direct UPI transactions. Banks have their payment apps, they said.
Hundreds of accounts created on Paytm Payments Bank without proper identification were one of the major reasons for the RBI to impose stringent curbs on the company, people familiar with the matter said.
More than 1,000 users were found to have linked the same Permanent Account Number (PAN) to their accounts. The compliance submitted by the payments bank was found to be incorrect during verification processes conducted by both the RBI and auditors.
The RBI is concerned some accounts could have been used for money laundering, sources said. After informing the Enforcement Directorate (ED), the RBI has sent its findings to the Home Ministry, and the Prime Minister's Office.
CAIT the ED should investigate Paytm if evidence of fund irregularities is found. There were also reports of non-disclosure of major transactions within Paytm Payments Bank and associated parties, further intensifying regulatory worries.
"Our advisory is a precautionary measure to protect the financial interests of traders in light of recent developments. We encourage users to stay informed and take proactive steps to ensure the security of their funds," the two CAIT officials said in the statement.
Transactions routed through the parent app of Paytm raised data privacy concerns, leading to the RBI's decision to halt transactions through Paytm Payments Bank. While user deposits in savings accounts, wallets, FASTags, and NCMC (national common mobility card) accounts are not immediately affected, the company will have to rely on third-party banks for its operations until February 29.
Following the RBI's notice, Paytm stock experienced a sharp decline, plummeting 36% over two days and wiping $2 billion off its market value. Paytm founder Vijay Shekhar Sharma dismissed the regulatory actions as a "speed bump" during a conference call with analysts, aiming to reassure stakeholders amid the ongoing turbulence.
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