Paytm tanks 14% hits new low post RBI curbs on Payments Bank

Paytm has clarified stating the RBI ban does not impact on the services provided in partnership with other financial institutions.

Shares of One97 Communications, the parent company of digital payments major Paytm, tanked nearly 14 per cent to hit a new low of Rs 672 on the BSE in Monday’s intra-day trade after the Reserve Bank of India (RBI) barred Paytm Payments Bank (PPBL) from onboarding new customers with immediate effect because of certain supervisory concerns.

The stock feel below its previous low of Rs 728.50 touched on March 8, 2022. The stock has now declined 69 per cent when compared with its issue price of Rs 2,150. The company made its market debut on November 18, 2021.

As of 10:55 AM, the stock quoted at Rs 693, down 10.5 per cent, with trades of around 300,000 shares on the BSE so far.

The banking regulator has directed Paytm PB to appoint an IT audit firm for conducting a comprehensive system audit of its IT system. Paytm PB will need specific permission from the RBI to restart the onboarding of customers following a review of the audit. Paytm has said that, PPBL, was taking immediate steps to comply with RBI directions and was looking to appoint a reputed external auditor to conduct a comprehensive systems audit of its IT systems.

The company said the RBI order does not impact any existing customers of PPBL, who can continue to use all banking and payment services without interruption. All existing users of Paytm UPI, Paytm Wallet, Paytm FASTag, and bank accounts can continue to use these instruments, including debit cards and net banking, for payments, in an exchange filing.

This direction does not have an impact on the services that Paytm provides in partnership with other financial services institutions. We remain focused on expanding digital payments and financial services to promote financial inclusion in India, the company said. CLICK HERE FOR FULL STATEMENT

ICICI Securities believe this embargo will have adverse impact on onboarding new customers for wallet, savings/current account. The ban on customer acquisition shall cripple business growth for Paytm PB, which is targeting to add half a billion customers to its fold. Also, it may defer PPBL’s plan to apply for conversion into small finance bank, the brokerage firm said in a note.

“Paytm's recent ban on adding new customers due to likely gaps in its technology systems is definitely going to hurt the business sentiments. The immediate impact will be negative. However, Paytm has already on boarded a very large customer base onto the payments bank, but the ban may affect their chances of upgrading to a small finance bank. The stock may see more selling pressure and may touch the level of Rs 500 in the medium-term," said Ravi Singh, head of research and vice-president, Share India.

Technical View 

Near-term Resistance: Rs 710

The stock has been trending downwards since its dismal debut in November 2021. In its brief trading history of around four months, Paytm has not even once closed above its short-term moving average (20-DMA) during this period, thus underlining the dominance of the bears at the counter.

With today's steep fall, the stock currently trades below the lower-end of the Bollinger Band on the daily charts place at Rs 710. The near-term bias is likely to remain fairly negative as long as the stock trades below Rs 710.

Among the key monemtum oscillators, Directional Index (DI) and MACD (Moving Average Convergence Divergence) are in favour of the bears. The 14-day RSI (Relative Strength Index) is in oversold zone, while the Stochastic Slow is in neutral mode.