3 Shocking KYC Blunders That Crippled This 30 Crore User Bank!

Paytm’s founder likened the company’s struggles to an accident and vowed to learn. Revenue and profits declined due to Paytm Payments Bank’s troubles with KYC norms and RBI restrictions. The bank’s issues began in 2018 with licensing violations and have since escalated to a ban on acquiring new users.

CONTENTS: 3 Shocking KYC Blunders That Crippled This 30 Crore User Bank

• Paytm struggles: Setback, learning, adapt, improve
• Paytm decline: Revenue down, RBI restrictions
• Paytm Payments Bank: KYC woes, user growth halt

Vijay Shekhar Sharma, the founder and MD of Paytm, compared the company’s recent struggles to a daughter who met with an accident and is now in the ICU. Speaking at the JIIF Foundation Day event in Delhi, Sharma expressed that the company was on its way to profitability and generating free cash, akin to a daughter preparing for an important exam.

However, unforeseen challenges have set them back. From a professional standpoint, Sharma admitted that Paytm could have performed better, recognizing that they had responsibilities they should have handled more effectively. He emphasized that they have learned from their experiences.

One 97 Communications, the parent company of Paytm, reported a decline in revenue to ₹2,399 crore in Q4 FY23, down from ₹2,465 crore in the same quarter the previous year.

Additionally, losses increased to ₹551 crore from ₹168 crore, mainly due to writing off ₹227 crore on its investment in Paytm Payments Bank Ltd, where it holds a 49% stake. Earlier this year, the Reserve Bank of India (RBI) directed Paytm Payments Bank to limit its operations after February 29, 2024, due to non-compliance with KYC norms and money laundering concerns.

This directive included banning transactions such as deposits, credit facilities, top-ups on prepaid and post-paid accounts, Fast Tag recharges, and UPI transactions.

Paytm Payments Bank first came under scrutiny by the Reserve Bank of India (RBI) in 2018, when the central bank halted the opening of new accounts due to licensing violations and non-compliance with KYC norms. In 2021, the bank was fined ₹1 crore for submitting false information related to money laundering concerns.

In 2022, Paytm Payments Bank was banned from acquiring new customers. Founded in 2017 by Vijay Shekhar Sharma, Paytm Payments Bank is the banking arm of One97 Communications and had a user base of around 30 crore.