Paytm Payments Bank meltdown, its meaning | Explained

The Reserve Bank of India has ordered Paytm Payments Bank to halt most of its business, causing a major crisis for the company.

Son of a schoolteacher from Aligarh district in Uttar Pradesh, Vijay Shekhar Sharma was enamoured by Jack Ma-run Alibaba's focus on smartphones rather than desktop computers, when he built a digital payments company that would let Indians pay for vegetables, pay utility bills or buy cinema tickets using their mobile phones.

Mr. Sharma, the poster boy of India's fintech boom, also set out to build an Alipay-like mobile marketplace to go alongside the payments business, allowing businesses to sell goods from matchbox to iPhones online.

With fame came a set of controversies for arguably the most high-profile of a wave of Indian tech entrepreneurs. But none like the one now. The current crisis where the Reserve Bank of India (RBI) has ordered Paytm Payments Bank to halt most of its business, is an existential one.

Here is a breakdown of Paytm Payments Bank crisis

The RBI last week ordered Paytm Payments Bank Ltd, a restricted bank that can take deposits but cannot lend, to not take any further deposits or conduct credit transactions or carry out top-ups on any customers accounts, prepaid instruments, wallets, cards for paying road tolls after February 29.

Paytm Wallet customers can use money till the time their balance is exhausted. They cannot add money after February 29. And in case the RBI does not relent, top-up for Paytm Wallet will stop and transactions through it would no longer can be carried.

Paytm Payments Bank Limited (PPBL) is an associate of One97 Communications Limited (OCL). One97 Communications holds 49 per cent of the paid-up share capital (directly and through its subsidiary) of PPBL. Mr. Sharma has a 51 per cent stake in the bank.