Paytm Payment Gateway: 'India's Paypal' Paytm in money laundering allegations! Three consecutive days of losses wiped out nearly half of the market capitalisation.

Shares of Paytm, India's popular digital payments app, tumbled again on Monday, 5 February, approaching all-time lows, continuing last week's downward trend.

Founded in 2010, Paytm is marketed as the "Alipay of India". It has become the largest payment platform in India, with more than 300 million registered users, accounting for half of the country's Internet users. At present, Paytm has developed into a comprehensive financial services platform, covering a number of services such as digital payments.

The trigger for this share price fall was a statement issued by Paytm last Thursday (1 February), which said that the Reserve Bank of India had asked the company to stop its popular mobile wallet service and other operations from March. Since then, Paytm's market capitalisation has evaporated by about $2.5 billion, or about 43% of its total market capitalisation.

Suspected money laundering

The Reserve Bank of India's directive has undoubtedly dealt a major blow to Paytm's business model, leading to a two-day drop in the share price of 20% on Thursday and Friday last week respectively.

After hitting the daily price limit for shares for several days, Indian exchanges have reduced the daily price limit to 101 TP3T from 201 TP3T.

By Monday, the shares were halted for the third consecutive trading day at Rs 438.5 per share (about $5.28), slightly above the all-time low of Rs 438.35 set in November 2022.

Over the weekend, three sources familiar with the matter revealed that the Reserve Bank of India found hundreds of thousands of accounts with insufficient authentication in Paytm's payment system and forwarded the information to India's agency that fights financial crime.

The Reserve Bank of India is concerned that some of these accounts could be used for money laundering, the sources added.

India's Revenue Minister Sanjay Malhotra said on Saturday that the agency fighting financial crime would investigate Paytm Payments Bank if new allegations emerge.

In response to the money laundering allegations, Paytm quickly issued a strong denial statement saying that neither the company nor Paytm Payments Bank has ever been investigated by law enforcement agencies.

Also, Paytm is in preliminary discussions with Jio Financial Services for a possible sale of its mobile wallet business, which is part of Paytm's payments banking unit, local media reported on Monday.