Paytm Expected to Keep Customers Despite Crisis, Predicts Brokerage Firm UBS

The Reserve Bank of India's decision to prohibit Paytm Payments Bank on January 31 sent shockwaves through the financial markets due to the platform's extensive reach in India. The RBI directed Paytm Payments Bank, affiliated with One 97 Communications, to cease accepting new deposits in both its accounts and digital wallets. However, a research note from global brokerage firm UBS suggests that Paytm has the potential to retain a significant portion of its customer and merchant base following approval from the National Payments Corporation of India (NPCI).

The RBI has granted a 15-day extension until March 15, 2024, for most operations associated with Paytm Payments Bank. Additionally, it clarified that customers utilizing @paytm UPI handles can transition to banks following approval from NPCI. According to a survey by UBS, Paytm's cloud and commerce business will experience less impact from the regulatory measures. This sector is propelled by customer engagement within the app and is not directly tied to PPBL. The brokerage firm stated, "We anticipate an 18 percent year-on-year growth in this segment for FY25E."

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UBS anticipates a gradual enhancement in Paytm's EBITDA margin, projecting an average of eight percent from fiscal year 2024 to 2028.

This assessment follows recent positive sentiments from Goldman Sachs, Morgan Stanley, and Bernstein regarding Paytm. Morgan Stanley highlighted the regulatory clarification concerning Paytm's UPI operations as "incrementally positive."

In other developments, Paytm announced on Monday that Vijay Shekhar Sharma would resign as non-executive chairman and board member of its payments bank unit as part of the company's board overhaul in response to regulatory measures imposed by the central bank.

In an exchange filing, Paytm announced that Srinivasan Sridhar, former chairman of state-owned Central Bank of India, former Bank of Baroda Executive Director Ashok Kumar Garg, and two retired Indian Administrative Service officers would join its board.

Meanwhile, Finance Minister Nirmala Sitharaman requested the Reserve Bank of India to conduct monthly meetings with fintech firms to address their regulatory concerns in the aftermath of the Paytm crisis. Additionally, Finance Minister Nirmala Sitharaman held meetings with representatives from the fintech industry to listen to their concerns and gather insights into the challenges they are facing.

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