Paytm shares slide after India imposes restrictions on banking joint venture

Central bank says restrictions will continue pending a comprehensive audit of IT systems

The Paytm app on a smartphone. The company's shares dropped by as much as 13 per cent on Monday. Reuters

Paytm's shares dropped by as much as 13 per cent after the Reserve Bank of India barred the digital payments company’s Paytm Payments Bank venture from accepting new customers.

The action is based on certain “material supervisory concerns” and the restrictions will continue pending a comprehensive audit of its information technology systems, the Indian central bank said on Friday.

Paytm Payments Bank is a joint venture of One 97 Communications, commonly known as Paytm, and the company’s founder Vijay Shekhar Sharma.

The company is taking steps to comply with the central bank’s directive, including the appointment of an external auditor, it said on Saturday. Existing customers will be unaffected.

The stock traded down 11 per cent at 686 rupees ($9) at 7.50am UAE time after earlier falling to 675 rupees.

Paytm Payments Bank started operations in November 2017 after receiving its licence in 2015.

Mr Sharma leads the bank’s strategy and vision, according to its website, and has played a vital role in the evolution of mobile payments in India.

Separately, Morgan Stanley analyst Sumeet Kariwala cut the recommendation on One 97 Communications to “equal weight” from “overweight”. It has a price target to 935 rupees.