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March 26, 2024

RBI Regulatory Actions Prompt Mutual Funds to Exit Paytm Holdings: Market Reacts Sharply

The regulatory interventions of the Reserve Bank of India (RBI) have triggered significant responses in the market, leading to the complete exit of six mutual funds from One97 Communications Ltd, the parent company of fintech giant Paytm, in February of this year.

This decision came as a result of a sharp decline in the stock price, directly influenced by the RBI’s regulatory measures against Paytm Payments Bank for ‘persistent non-compliances’.

The six mutual funds that divested their holdings include Mahindra Manulife Mutual Fund, Quant Mutual Fund, Bajaj Finserv MF, JM Financial MF, Union MF, and Baroda BNP Paribas MF. Collectively, they sold over 91 lakh shares valued at approximately INR 380 crore.

RBI’s stringent actions against Paytm Payments Bank, including restrictions on new deposits and certain transactions, have sparked concerns about the company’s operational capabilities, affecting investor confidence. The initial announcement alone resulted in over a 40% drop in Paytm’s stock value.

This regulatory scrutiny has led to a notable decrease in the value of Paytm shares held by mutual funds. From January to February, the total value of Paytm shares held by mutual funds dropped from Rs 3,384 crore to Rs 1,426 crore, showcasing the market’s response to the company’s regulatory and operational challenges.

Looking ahead, there is potential for a turnaround for Paytm with the anticipated grant of the third-party application provider (TPAP) license by the National Payments Corporation of India (NPCI) by mid-March.

This license would enable Paytm to continue offering Unified Payments Interface (UPI) services, potentially stabilizing its operational framework. RBI Governor Shaktikanta Das’s remarks about the NPCI’s forthcoming decision on Paytm’s application indicate a critical juncture for the company in navigating its regulatory hurdles and restoring investor confidence.

 

Jhumpa Lahiri

Jhumpa Lahiri

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