Paytm says a report claiming its Payments Bank’s data was leaked to Chinese firms is “completely false and sensationalizing,” as the India fintech giant rushed to provide clarification to allay investors’ concerns after its shares tumbled as much as 14.7% to $8.6 apiece on Monday.
Bloomberg reported this afternoon that Paytm digital bank was barred from adding new customers because it violated India’s rules by allowing data to be shared with China-based entities that indirectly owned a stake in Paytm Payments Bank.
Refuting the report, a Paytm spokesperson said that Paytm Payments Bank is a “homegrown bank and is fully compliant with RBI’s directions on data localisation.”
The spokesperson added: “All of the Bank’s data resides within the country. We are true believers of the Digital India initiative, and remain committed to driving financial inclusion in the country.”
Vijay Shekhar Sharma, founder and chief executive of Paytm, further categorically denied the report on national TV, adding that the central bank’s notice to Paytm Payments Bank “absolutely does not contain any point that mentions any data access, or server or data access through whatsoever [means.] Or server being outside of India,” he said.
The Reserve Bank of India, the nation’s central bank, on Friday barred Paytm Payments Bank from accepting new customers, citing certain “material supervisory concerns,” which it did not outline.
“The bank has also been directed to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system. Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing report of the IT auditors,” the RBI added.
Paytm, which has amassed over 300 million users and operates multiple businesses, said it does not believe the RBI’s action will “materially impact Paytm’s overall business.”
Shares of Paytm tumbled as much as 14.7% Monday before a slight recovery. The market cap of Paytm at the time of publication stood at $5.72 billion, down from $16 billion at which the fintech startup raised in late 2019. The startup, once India’s most valuable, raised $2.5 billion in the country’s largest IPO last year.
Brokerage firm Macquarie Capital, whose analysts have been the sharpest critic of Paytm, said the recent development is unlikely to have major business impact on the firm, but will reduce its chances of “upgrading” to a small finance bank, for which the firm is eligible to apply in May.