India's MakeMyTrip, PolicyBazaar warn RBI of fintech hit after Paytm crackdown -letter

PB Fintech

06/02/2024 12:20

By Aditya Kalra and M. Sriram
       MUMBAI, Feb 6 (Reuters) - India's MakeMyTrip  MMYT.O 
and insurance seller PolicyBazaar  PBFI.NS  have told the
central bank its crackdown on digital payments firm Paytm
 PAYT.NS  will hurt investment in the fast-growing
financial-technology sector, a letter seen by Reuters showed.
    The Reserve Bank of India (RBI) last week ordered Paytm's
banking unit, which powers most of the features of its popular
digital payments app, to cease the majority of its operations
from March 1 for "persistent non-compliance", sparking a $2.3
billion rout in the company's stock.    
    There are concerns about the broader impact on India's
fin-tech sector which the government says raised $5.6 billion in
2022, as digital payments and the use of smartphones and the
internet boomed. Foreign investors such as SoftBank and Tiger
Global have bet on the space in recent years.
    In their letter to the RBI, online travel agency MakeMyTrip,
PolicyBazaar and 10 other entities asked authorities to
reconsider their decision on Paytm, saying it "could send a
negative signal to the global business community" and have "a
chilling effect across the fintech sector, discouraging
innovation and investment in a critical growth engine of the
Indian economy".
    The RBI, which cited "supervisory concerns" and
non-compliance with rules as reasons for its decision, did not
respond to Reuters request for comment on the letter. 
    Paytm, backed by SoftBank, has said it is confident of
continuing operations and sources say it is holding talks with
the central bank.
    MakeMyTrip and PolicyBazaar declined to comment while Paytm
did not respond to requests for comment.
    Paytm's app is one of the most downloaded in India and its
flamboyant CEO Vijay Shekhar Sharma is seen as the de facto
leader of the startup space, once among India's 100 richest
people.
    Now, he arguably faces his biggest crisis in trying to save 
Paytm, which has 100 million monthly users and competes with the
likes of Walmart's PhonePe and Google. 
    Paytm shares fell to a record low of 395 rupees early on
Tuesday in Mumbai.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Newsmaker: India startup rockstar, Paytm CEO Sharma, battles
crisis    https://reut.rs/4br1YCn
India's Paytm crackdown spooks retailers; Walmart, Google swoop
in     https://reut.rs/495DtsS
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 (Editing by Kirsten Donovan)
 ((Sriram.Mani@thomsonreuters.com;; Reuters Messaging: Twitter:
@followthemani))