Paytm share price crashes 8% after RBI cancels Paytm Payments Bank License — Should you buy, sell or hold?(REUTERS)AI Quick ReadShares of One97 Communications, parent of fintech Paytm, tumbled as much as 8% in early trade on Monday, 27 April, after the Reserve Bank of India (RBI) cancelled the license of Paytm Payments Bank Ltd (PPBL), more than two years after restricting its core business activities.
Paytm share price hit the day's low of ₹1055.25 on the BSE, erasing nearly ₹6,000 crore from investor wealth as its market capitalisation tumbled close to ₹67,500 crore, as against Friday's close of ₹73,427 crore.
RBI announced the cancellation of PPBL's licence, effective from the close of business hours on Friday, citing violations of rules. The central bank added that Paytm Payments Bank has enough liquidity to repay its entire deposit liability upon winding up.
The RBI said the affairs of the bank were conducted in a manner detrimental to its own interests as well as its depositors.
"The general character of the management of the bank is prejudicial to the interest of depositors as also the public interest... no useful purpose or public interest would be served by allowing the bank to continue...," the RBI said in a statement.
In response to the RBI's action, Paytm assured its shareholders and investors that the winding up of PPBL will not have any material impact on its business or financial conditions. The company over the weekend also approved the winding-up of PPBL.
"The Company wishes to assure its shareholders and investors that the winding-up of PPBL and the consequential cessation of the associate relationship are not expected to have any material impact on the business, operations, or financial condition of the Company. The Company continues to operate its businesses independently and in accordance with applicable laws and regulations," it said in an exchange filing.
Upon the winding-up order becoming effective, PPBL shall cease to be an associate company of the company.
(This is a developing story. Check back for updates.)
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