What caused the downfall of Paytm? The once India’s largest IPO is now on central bank’s lockdown

The Reserve Bank of India (RBI) accused Paytm Payments Bank—a financial institution that holds all the money in Paytm’s digital wallets—of “persistent noncompliance” on Jan. 31 and ordered the bank to stop accepting new deposits.

Later, on March 1, India’s Financial Intelligence Unit turned in a $660,000 fine against the bank for channeling funds through illegal activities such as online gambling.


Paytm has promptly severed ties with the payments bank; Sharma resigned as chairman of the board of directors for the bank last week. At present, Paytm is trying to build relationships with third-party banks such as Axis Bank.

After March 15, which is RBI’s due date for Paytm Payments Bank to stop operating, it will continue to offer payment services as usual.

Speaking at a Tokyo conference, Sharma hinted that company advisors were responsible for its failures. “Many times your teammate and advisor may not be getting it correct…It is important for you, yourself to be taking care of it versus just letting a teammate or a adviser suggest that what should it be,” he was quoted by Bloomberg as saying.

Without payments bank licence however; Paytm can only facilitate transactions – “a business that provides “no revenue pathways”, Singhal says.”

Immediately after RBI’s order, in a stock filing, Paytm warned the order to close Paytm Payments Bank could drag down annual earnings before interest, tax, depreciation, and amortization by up to Rs. 5 billion, or $60 million at then exchange rates. Paytm generated $55 million in EBITDA in the nine months ending December 31, 2023.

However, Singhal predicted that if Sharma wanted to keep his brand alive, he will have to do it as Unified Payments Interface (UPI), because he cannot stay as a wallet or as a bank.

Paytm is the latest member of India’s startup royalty to flame out.