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Paytm Bank Under Audit Over Alleged Data Sharing with China

Paytm shares dropped over 13 percent following news that India’s central bank banned Paytm Payments Bank from signing new accounts until an audit of its information-technology (IT) systems is conducted.

The Reserve Bank of India (RBI) cited “material” supervisory concerns when announcing the audit on Friday (March 11), PYMNTS reported. Paytm shares were down 65% below their initial public offering (IPO) value.

See also: RBI Blocks Paytm Bank From Accepting New Customers

Founded in 2010 by Vijay Shekhar Sharma, who owns a 51% stake, Paytm’s parent company One 97 Communications went public in November and raised $2.5 billion in India’s biggest IPO. The company’s share price dropped 27% following its debut and is down over 64% from its issue price.

Paytm said it is cooperating with the central bank and appointed an external auditor in a move to comply with the RBI’s demands. Existing customers won’t be affected by the audit, and overall company operations will carry on as normal. Once the RBI is satisfied with the audit, then Paytm Payments Bank can return to signing new customers and business as usual.

Paytm Payments Bank was launched in 2017 to help Paytm reach the tens of millions of Indians who use mobile phones but do not have formal bank accounts.

Suresh Ganapathy, an analyst at Macquarie Capital Securities, told Bloomberg that the audit won’t likely be a major disruption to Paytm Bank’s business, but it could put a snag in any plans the unit had of “upgrading” to a smaller financial institution.

Read more: Paytm Sees Bigger Losses as It Reels From IPO Fallout

For the three months ending Dec. 31, 2021 revenue was up 35% over the previous quarter,  from $151 million to $204 million. Losses also widened from $64 million to $104 million. Payment services to consumers went up 60% and to merchants up 117%. The company’s partners distributed 4.4 million loans valued at around 21.8 billion rupees during the quarter.

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