Hello Friends, In this article we will know about why paytm stock is falling, why paytm failed, will paytm survive, who invented paytm, how paytm earns, when paytm started in india, which paytm services are banned, can paytm bes used in uk,
Let's understand the whole story of Paytm's rise and downfall in today's Artical. Paytm started in 2010. But initially, it was just a mobile recharging platform. An app through which you could recharge your phone and pay the landline bill.
The company gradually added more features to its app. It was only in January 2014 that Paytm Wallet was launched. Through which you could pay online using Paytm. By 2015, it was possible to pay for the Metro's recharges, electricity, gas and water bills. But in the right months, the company's popularity jumped, only after 8th November 2016. The day of demonetization. The next day of the ban cash, in many newspapers across the country, there were some such front-page ads. Paytm congratulates Honourable Prime Minister Shri Narendra Modi on taking the boldest decision in the financial history of independent India. Now, not ATM, paytm. The first controversy about Paytm was raised here. People questioned whether Paytm had any link with the government. Using the face of the Prime Minister in this manner while doing its advertisement.
The decision to ban cash, which was declared secretive, was taken on 8th November at 8pm. How did it happen that the next day, on the morning of 9th November, the front-page ad was published? Did this company already know that demonetization was going to happen? Whatever happened, one thing was clear. Paytm had a huge advantage because of this decision. According to the Euromoney report, Paytm had 125 million customers before demonetization. But after 3 months, Paytm's customers had reached 185 million. Even the CEO of the company, Vijay Shekhar Sharma, did not give up on capitalising this opportunity. Paytm hired more than 10,000 agents to distribute their QR codes to local shops and vendors. The shopkeepers in every city were encouraged to do Paytm. The company was growing very well.
But around this time, there were a few more controversies. One of them was the Chinese link between Paytm and Alibaba. In 2015, a Chinese company named Alibaba invested $680 million in Paytm. And 40% of the stake of the Paytm company, went to this Chinese company. Jack Ma, the founder of Alibaba, and Vijay also called him their hero. He gave a statement to the Financial Times. I became totally interested in China, Alibaba and Jack. All three things. Recently, you know the story of the relations between India and China. China is being intruded into the Indian border again and again. In 2017, the Doklam border stand-off took place. Many people criticized Paytm for this. That this company becomes a patriot when people want to sell something.
But Chinese funding is taken from behind. Because of this criticism, the Chinese stake in the company was reduced. In 2023, About 10% of the stake was transferred by Vijay himself. And the Chinese stake company has around 13.5% as of now. In May 2018, the next controversy about Paytm arose, when the investigative news agency, Cobra Post, carried out an undercover operation. Their undercover reporter went to meet Paytm's Vice President, Ajay Shekhar Sharma, who is Vijay Shekhar Sharma's brother. And when they were asked if they would spread the propaganda of our political party through their app, they happily accepted it. They said that when the government asked us for the data of some Paytm users in Jammu and Kashmir, the stone pelting that was going on, they happily gave it to the government.
In 2017, Paytm launched Paytm Payments Bank. They also started offering banking services. In a few months, a payments bank is like a bank, where you can create a bank account, deposit money, and take a debit card. But in comparison to a normal commercial bank, there are some important differences. Payments banks mostly focus on digital services. There are very few physical branches of payments banks. And according to the RBI rules, payments banks cannot offer credit card and loan facilities. The normal commercial banks like HDFC, SBI, ICICI, don't have a deposit limit. They can deposit any amount of money in those banks, but the RBI has a limit on the payments in the banks. You can't deposit more than ₹200,000 in these banks. I am telling you all this in detail because the current situation of Paytm, has a major reason behind it.
Paytm is a payments bank. RBI, the Reserve Bank of India, is the central bank of the country. It decides the monetary policy of the entire country. to print money. All the banks and financial institutions in the country, had to follow the RBI's rules and guidelines. On 31st January 2024, the Paytm crash happened because the RBI imposed operational restrictions on Paytm's payments to the bank. The RBI said that Paytm's payments to the bank kept violating our rules. They saw persistent non-compliance. And that's why we are now banning this bank. After 29th February 2024, Paytm's Payments Bank cannot accept any new deposits. Money cannot be topped up in customer accounts. New customers cannot be onboarded. And the RBI said that all the nodal accounts on the Paytm Payments Bank, should be closed by 15th March 2024.
Nodal accounts are the accounts used by e-commerce and online services businesses. As far as the Paytm wallet is concerned, you can use your existing balance, but after 29th February, no money can be invested in it. So obviously, this is a huge decision by the RBI. And such decisions are not taken in a flash. It's not that the RBI decided to apply for the Paytm class one day, and took all these decisions. Rather, there's a long history behind it. The truth is that Paytm was repeatedly warned by the RBI for years. But it didn't change. In November 2017, the Paytm Payments Bank was launched. And in June 2018, the first warning came from RBI. An audit found that Paytm was not following the anti-money laundering regulations properly.
And the customers who made their accounts on their bank, their identity was not verified properly. The KYC, Know Your Customer compliance, was not being seen by Paytm. So RBI said that Paytm should stop onboarding new customers. Until it fixes all these things. Paytm took some action regarding this warning. Because on January 2019, RBI said, okay, Paytm can now start onboarding customers again. The restrictions that were imposed were removed. But after about 2.5 years, in October 2021, there was another big shock. Paytm was fined ₹1 crore. Because while filling in their license application, they filled in wrong information and wrong documents. RBI says that the same things about which we had warned you earlier, customers are not being verified properly. Regulations are not being followed properly.
The same thing is happening again. Once again, the customer is stopped on onboarding. In October 2023, another big fine was imposed on Paytm. This time, it was ₹5 crore. The RBI was hoping that after two warnings, and two fines, at least Paytm would meet the regulatory requirements, and start verifying its customers properly. But even after all this, Paytm did not take these things seriously. And for this reason, on 31st January 2024, the RBI said that this is enough. If rules and regulations cannot be followed properly, then stop all this. The things that the RBI found here were shocking. According to CNBC, Paytm allowed lakhs of customers to open accounts in their bank without KYC. There were thousands of cases where thousands of customers opened different accounts using the same PAN card.
Some accounts saw transactions worth crores of rupees. There was a potential risk of money laundering. It could be money laundering through Paytm. Outlook reported that, according to an analysis, Paytm has around 35 crore wallets. Of which, 31 crore wallets are inactive. No one is using them. And the remaining 4 crore wallets, most of them have no or very little balance. Because of this, they can be used as mule accounts. Mule account is an account used for illegal activities, like money laundering. After this, the data privacy concern also came up. RBI said that the parent company of Paytm, 197 Communications Ltd, and Paytm Payments Bank, had no operational segregation. The flow of money between these two, was not disclosed in the financial statements. So many rules and regulations were ignored.
That somewhere, their CEO, Vijay Shekhar Sharma's arrogance is responsible. Because the interviews he did with the media channels, this was seen somewhere in their conversations. If you fundamentally believe that Paytm is the number 3 payment player, that is where the beginning of the problem is, in understanding. I'm surprised that people don't know this in this country, but we make profit, so it is. Somebody who has not met us and has an opinion on us, is not my opinion to keep an opinion on that. After RBI's announcement on 31st January, there was a stir. The money people had invested in Paytm, and started withdrawing the money, Paytm's stock quickly crashed. To calm people down, Paytm posted on its social media handles many times that nothing had gone wrong.
On 2nd February, Vijay Shekhar Sharma tweeted, To every Paytm-er, your favourite app is working. Will keep working beyond 29th February as usual. For every challenge, there is a solution, and we are sincerely committed to serve our nation in full compliance. India will keep winning global accolades in payment innovation and inclusion in financial services." As you can see, patriotism was once again supported here. We are not a company here, we are serving the country. With the name of India, Paytm was kept behind. I remember a saying from this. Patriotism is the last refuge of a scoundrel. You must have heard of this quote, right? In my opinion, all such companies should be alerted, that support patriotism to an extreme extent. A few years ago, there was a phone called Freedom 251.
The flag of India was printed on the back of the phone. It was sold as the world's cheapest phone, but it turned out to be a huge scam. If a company's products and services have value, they sell those things in the name of that value. But if they don't have much to say about their product or service, then the support of patriotism is taken. Buy our product because we are Indian. We are an Indian company, that's why you should buy our product. Anyway, when we come back to Paytm, the question arises, what will happen next? The internal employees of the company are facing a lot of uncertainty. They are not getting much clarity from the leadership, as to what will happen next. The Economic Times reported that an executive of the company told them that their business model might change.
Instead of being a bank, we will become a third-party payments app. So we will have to change some things in the backend. And we will have to make these changes in a very limited time. If you look at the annual report of Paytm, how much money this company has earned throughout the year, you will see that it has always been a loss-making company, since it was listed on the stock market. Look at this chart, in 2021, their company took a loss of ₹1600 crore. In 2022, a loss of ₹1500 crore. In 2023, a loss of ₹1.70 crore. The good news was that the company's annual losses were decreasing. So the next year could be expected to be this year, i.e. in 2024, that the company would earn its first profit.
But now, seeing all this, it seems difficult. The company expects that their loss this year could be more than ₹300-500 crore. Paytm revealed this to the public, saying that they would comply with the RBI guidelines. But after his announcement, the company's stock price dropped further. What is the path to profitability, Vijay? By when will Paytm make money? Make more money? By making more money? By making more money. Vijay Shekhar Sharma will have to find a better answer to these questions if he wants to convince people. Actually, convincing people will be the biggest challenge for Paytm. The common people are quite picky about their company's choice. And trust plays a very important role here. People choose their toothpaste at once, thinking that they will always use the same company's toothpaste.
They don't change that easily either. So a whole bank is being asked to change. It won't be easy to bring customers back for Paytm. But to convince customers is a matter of course. First, Paytm has to convince RBI. That is also not an easy task. But a ray of hope, a way to get out of this could be that another company comes, to buy Paytm's wallet business. A Business Standard report suggests that HDFC Bank and Jio Financial Services may come here and do this work. But Jio has denied this speculation, saying that they have no intention of doing this. And anyway, before doing such a sale, RBI's approval is needed.
