The Real Story Behind The Paytm Crisis (& why we are responsible too) | Akash Banerjee

Good days were going for Paytm in 2020 and 2021 Paytm set IPO price band at 2080-2150 per share People bought them in numbers thinking this was future of fintech 18,300 crore public issue was the largest in corporate history Paytm and Vijay Shekhar Sharma made history Now the market has changed and Paytm has hit lower circuit 3 days in a row Every day, 3 days in a row, the lower circuit has hit. As far as FinTech is concerned, the name of Paytm comes first. As far as startups are concerned, Vija

y Shekhar Sharma comes. Today, both of them are drowning. Both of them have come to the emergency What has happened in the last few days that has made them Both have come under emergency. Not only Paytm payments bank which has been hanged by RBI and has been sentenced to death but also Paytm overall as a company is now under question There are many reasons behind this. You and I have also been involved in this. I will explain how. But if you don't know, then let me tell what has happened. And wh

y is RBI so angry with Paytm? Slowly all the details are coming. CNBC TV 18 has released a detailed report and has told us why RBI is so angry. 31 crore out of 35 crore Paytm wallets are inoperative. I can't believe this but that's published. One PAN is linked to thousands of accounts. There are thousands of PAN numbers linked to hundreds or thousands. KYC's basic procedures are not followed. Here, we are getting our KYC done in Fastag. And there, Paytm has opened accounts in its own bank which

have not registered their basic KYC. And the KYC anti-money laundering rules have been violated. All this has been done The news is coming that there were lies in the compliance report. along with that, the financial and non-financial businesses of Paytm Payment Bank is linked to other companies of Vijay Shekhar Sharma It is violation of basic license as bank is a serious business, people's money is involved, so basic norms should be followed When RBI got to know all these things, then.... on Ja

nuary 31st, a notice comes, but then people didn't understand that this notice is not just a notice, it is a death sentence for Paytm Payments Bank. Because the bank has been clearly told that you cannot do any activity after 29th of February. No further deposit, credit transaction, top ups, bill payment - nothing after 29 Feb Now why is this surprising and interesting? RBI has grabbed Paytm in such a way that there is no escape route ... like if you fulfill these and these criteria it will be o

kay The question is, why did RBI take such a step? Is Paytm really so guilty that RBI had to take this step? Many people are saying that this is a semi-final step. The final step might be that the entire banking license will be snatched. The question then arises, did Vijay Shekhar Sharma know about all this? What were his board members doing? Were they just sitting and talking in their corporate boardroom? Or is there any angle of corporate takeover in this? How will this impact us? What is our

mistake in this - worshipping false gods, making poster boys? Let's clear that it's not like RBI suddenly woke up with a plan to do this to Paytm Paytm Payments Bank's problem came within a year of its existence. And as soon as it happened, violations, data breaches, risk of fraud and lack of transparency of the promoters - happened from beginning For the first time, RBI had a ban on Paytm Payments Bank in June 2018. It had been a year since the bank was established and RBI found that you are vi

olating your licensing conditions, your basic conditions. You are not maintaining the day-end balance. You are not following the Know Your Customer's KYC guidelines. So, RBI said that all these things are wrong. We are stopping you from opening new accounts. This was done in June 2018. Then, the Paytm must have said that we are fixing all these things. Please forgive us. Give us one more chance. In December 2018, they gave assurances, so this ban was lifted. That was first strike In October 202

1, RBI found out that Paytm Payments Bank had submitted wrong information to RBI. Fine of Rs 1 crore was imposed If it was a decent bank, manager, corporate governance or board oversight, then it would have been more careful from then on. But in March 2022, RBI sees that there are lapses in technology, you have not taken care of cyber security, you have not complied with anti-money laundering. Your servers, your physical infrastructure, that bank is sharing with Paytm's parent company One97 All

servers and people connected while bank is a serious undertaking and it should be kept in separate oversight That's why RBI said that they are imposing supervisory restrictions .... This is March 2022. You can't take new customers again. An external firm will conduct system wide audit. Then comes another warning in October 2023. When RBI reads the auditor's report RBI finds that after so much warning, so much audit, so much fine, no action was taken to stop these malpractices So, in October 2023

, RBI imposed a monetary penalty of 5.39 crore rupees because Paytm did not follow all the compliance and KYC norms. RBI says that you are not clearing the details of the beneficial owners, you are not monitoring the payout transactions, regulatory ceilings... because in some accounts, transactions worth crores are going on, which were above the regulatory ceiling. and when there is a cyber security incident, you don't report it. The video-based consumer identification process or VCIP, you don't

follow it. So, after so many things, they get fined again. After breaking the compliances so many times, any businessman comes on the line. But a businessman who feels that they cannot be touched because it can take the name of the country, FinTech, banking, and can show its personal stature But RBI has said clearly now... that you have lakhs of such customers whose KYC is not approved, their PAN validation fails, there are thousands of such cases where their PAN number is the same. And in som

e cases, 1000 accounts are linked to one PAN number The total value of transactions in some accounts are in crores of rupees. Why are these crores of rupees being transferred from Paytm? This has also raised the issue of money laundering concerns. Though, the government has now clarified that no legal investigation is being done on this. But a very high number of dormant accounts which can be used as mule accounts for transferring of illegal money. And, as I said in the beginning, if you have 35

crore Paytm wallets, out of which 31 crore are inoperative, then it shows the economy of the country or the economy of Paytm but it is bad news Right now govt is saying that it does not mean Paytm was involved in illegal money laundering activities. But they did not maintain their systems properly. Their system can be used to do illegal activities. This is about non-compliance. But unfortunately, Paytm's story goes further. You are sharing data, human resources and servers with other companies.

This is not allowed in any bank. Many people are asking what Paytm board was doing. Why didn't the board take these warnings seriously? The board's job is to take these warnings seriously and ensure that there is corporate governance. So, one thing is clear from this incident that the duty, the board, the independent directors, they have failed on their duty, and were mute spectators. Maybe they thought Vijay Shekhar Sharma will handle everything as his reach is very high Management problems we

re there before in Paytm... it is not shocking. RBI has taken a big decision after four setbacks to Paytm. Now it is difficult for Paytm to bounce back. Many people are saying that this is just a time given to depositor to use the money and shift it. So that people don't panic and lose their money. But, as of now, it seems that the Paytm banking ambitions will be lost. It won't get the license again. Now, the question is about the Paytm wallet. If you and I have the Paytm wallet, we can use its

fund till it is depleted. But, we will not be able to add money in it after February 29. There is only one exit option for this. A bank should come and save the Paytm. And with the help of that bank, these operations will run. But if no bank comes to rescue......it means that you won't be able to top-up, you won't be able to make a transaction through it. And the wallet will also be finished. At the end of Dec 2023 Paytm had merchant base of 3.93 crore Like when you go to a shop, so, Paytm has a

huge market. Paytm has till 29th of February. They have to update QR codes and shopkeepers must shift to another bank You can understand that this is a logistical nightmare. In a few weeks, if you have to shift merchants from Paytm bank to another, it is a crisis PhonePe, BharatPe, Razorpay, will get a better chance in this crisis Because many merchants will shift to other payment gateways, payment companies. SBI has said that they will attempt to rescue customers, not Paytm No rescue operation

for Paytm bank like for Yes Bank But here, a very interesting thing is coming up. One is that Paytm has to ensure that people's 3000-4000 crore in their wallet can be easily withdrawn. If they have deployed this money elsewhere, then there will be a problem there as well. Because it is important for people to know whether their money is safe or not. After that, Paytm has to see if it can do a tie-up with someone... That is the question. Is it end of the road or new tie up? Vijay Shekhar Sharma

is called a poster boy of India's fintech boom He wanted to create a mobile marketplace like Alipay. Where he could sell goods and services too. Paytm mall was also built. Unfortunately, it had already collapsed Now, Paytm bank is gone. Now, you have the core business of Paytm... payment transactions. So, what was the reaction of Vijay Shekhar Sharma? As it happens with other businessmen, when RBI's decision came... We are working for the country. We will hide behind the flag. What does he say

in his tweet? I with every Paytm team member salute you for your relentless support For every challenge, there is a solution and we are sincerely committed to serve our nation in full compliance. You will serve the nation later. First you should have served the RBI norms earlier. Then you won't take cover behind country. Earlier, Paytm was quite confident that they will continue their financial services, loan distribution, insurance distribution, equity broking, etc. There will be no impact on t

his. And our offline merchant payment network offerings like Paytm, Paytm QR, Paytm Soundbox, Paytm Card Machine, will run perfectly. Yes, we will lose some 300-500 crores, but we will... This is a speed bump, said Vijay Shekhar Sharma said. He also said that, while talking to his employees, that, we are trying to comply, we are working with RBI, we are looking for other banking partners. He tried to take a confident and reassuring tone, no employee will be sacked he said. But, now, slowly, that

confidence, which was seen in the first 2-3 days, that confidence is now slipping a little. Why? Confederation of All India Traders has issued an advisory on Sunday. They advised traders to switch from paytm to other payment app Their shares are hitting lower circuits every day. 43% overall down. Around lifetime lows. So, the stock market had to adjust. They said, no, not 20% this time. Circuit breaker was at 10% Now, here comes the interesting thing. The shares of Jio Financial Services spiked

by 15% on Monday. Why? Because there is a rumor that HDFC Bank and Jio Financial Services Ltd. can acquire Paytm Wallet Business. Many people are questioning the timing of the deal. Can Paytm even sell their wallet business? There is RBI clampdown. So, it will take some time to sort out all these issues. Banks are also waiting for RBI's permission to partner with Paytm to take over as their merchant accounts. Because, if a bank takes over, it will benefit them. But, remember that if KYC is not

done, then lakhs of accounts will have to re-KYC for any bank that takes over. You and I are at fault here. Why? This is the third episode in a year. Ashneer Grover, Byju Ravindran and now Vijay Shekhar Sharma. The great personalities that people used to worship have fallen to the ground. Many fund managers and investors invested in the IPO of Paytm. When the share came to the market, people questioned the price. How can you justify the price of Rs. 2000? At that time... If someone asked a ques

tion, it was called anti-establishment. If someone asked a question, it was deemed anti-India growth story. I am giving a link below, how Vijay Shekhar Sharma spoke to the anchor in CNBC, when the anchor just asked this question, that what is your path to profitability? Why is your valuation so high? And how rudely Vijay Shekhar Sharma spoke to that anchor. How arrogant one can be you can understand. And when we respect them, their arrogance increases And whether it is Paytm or BYJU's, the story

is the same. Ultimately, behind their collapse, everyone wants quick, unnatural growth at any cost And directors, you just sit quietly. We know how to do it. We know where the political wires are connected. No need for you. We can grow on our own.. this is called God Syndrome. After early success, they are considered gods by people ... so they think they are above the law. That is why Byju's can say everything is fine, even without declaring accounting, without filing tax return If you talk abo

ut Byju's, they were the kings in Edtech. If you talk about Fintech, Paytm was the king. Today, you can see the state of Byju's and Paytm. I have made an entire episode on Byju's. They are damaging our country and our economy But we are so hyped. Sameer Arora said something right but he might have been abused for this... When he said that FinTech is a bubble. Because ultimately, you are just showing a QR code, you are making the payment system a little more comfortable. But what is the path to p

rofitability? That you are giving a loan to the same merchant. this non-banking finance corporation has been around for a long time. So what's new? It's convenient, but to call it a revolutionary step, which will transform the economy? Link is below. Problem is we don't listen to experts It's been 7 years since demonetization. Today, cash in circulation in the economy has doubled So what are you saying that your payment and your UPI will transform the country? Have you ever asked yourself a ques

tion? Yes, it's fine, just like credit card there is UPI How can it be transformational? But no, we will be swayed by the hype. That's why on Deshbhakt, we say, don't go so much on hype. You will lose your money. Don't worship these false gods. Your heart will break. these get-rich-quick guys, they are giving bad names to the nation and defaming startup industry And those who ask questions, even if you don't agree, but at least try to understand why the question is being asked Lastly don't be a

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