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Refuting media reports, Indian super app Paytm has said the Reserve Bank of India (RBI) did not ban the firm from onboarding new customers because it was sharing information with Chinese affiliates.
Last Friday (March 11), the RBI directed Paytm to stop onboarding new customers due to “certain material supervisory concerns” until ordered otherwise.
The fintech has also been directed to appoint a firm to conduct a comprehensive audit of its IT system.
Subsequently, on Monday (March 14), Bloomberg broke the news that the ban was a result of data sharing violations that the RBI uncovered as part of its annual inspection process.
Citing sources familiar with the matter, the report claimed Paytm transferred data to servers of China-based entities that indirectly own a stake in the payments firm, as well as failures to properly verify customers.
Paytm, which carried out a heavy loss-making debut on the Indian stock exchange last November, lists the Chinese Ant Group among its indirect shareholders with an almost 30 percent stake.
Paytm has around 333m registered users in India and is the third-largest mobile app used on India’s Unified Payments Interface (UPI). Such data sharing could have a significant impact on Indian users.
Nonetheless, reacting to the media reports, Paytm denied it transferred data abroad.
The payments app tweeted that the “Bloomberg report claiming data leak to Chinese firms is false and sensationalist”.
“Paytm Payments Bank is proud to be a completely homegrown bank, fully compliant with RBI’s directions on data localisation. All of the bank’s data resides within India,” the post reads.
The alleged data sharing violations relate to a 2018 RBI directive, which requires banks and payment system providers to ensure that all the payments data they handle is stored solely in India.
Since the enforcement of the directive started, the regulator has issued numerous notices barring market players from onboarding new customers, including card giants Mastercard, American Express, and the Diners Club. Unlike the Paytm notice, each of these announcements referred to the data localisation concerns as the ground for taking action.
Paytm’s share price plunged from INR776.15 (€9.30) on Friday to INR589 (€7) by Tuesday afternoon, suffering a 25 percent drop.
This represents the latest fall in a difficult five months for the payments app, whose share price has undergone a torrid time since its IPO on November 18, 2021. The company has gone from a peak of INR1,799 (€21.50) on November 25 to its current low, losing two thirds of its value in the process.
