Paytm says a report claiming its Payments Bank’s data was leaked to Chinese firms is “completely false and sensationalizing”. 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.
Paytm’s Chief Executive Officer Vijay Shekhar Sharma is also the majority shareholder in Paytm Payments Bank. On March 14 denied a report which alleged that the lender allowed data to be leaked to Chinese firms.
“Absolutely false. The report is completely factually wrong. It is false to assume that the bank is sharing any data with Chinese or any other foreign entities,” Sharma said in an exclusive conversation with CNBC-TV18.
Paytm is backed by China’s Alibaba Group Holding and its affiliate Ant Group.
Annual inspections by the Reserve Bank of India (RBI) found that Paytm Payments Bank’s servers were sharing information with China-based entities that indirectly own a stake in the firm. Bloomberg News had reported on Monday, citing a person familiar with the matter.
“Paytm Payments Bank is proud to be a completely homegrown bank, fully compliant with RBI’s directions on data localization. All of the Bank’s data resides within India,” the company said on Twitter.
A recent Bloomberg report claiming data leak to Chinese firms is false and sensationalist.
Paytm Payments Bank is proud to be a completely homegrown bank, fully compliant with RBI’s directions on data localisation. All of the Bank’s data resides within India.
— Paytm Payments Bank (@PaytmBank) March 14, 2022
Paytm, has amassed over 300 million users and operates multiple businesses. They 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 a 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.
What’s for Paytm Payments Bank?
The RBI has also directed the payments bank 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 the report of the IT auditors,” the RBI noted. In its statement, Paytm Payments Bank said that it was working with the banking regulator to get the concerns addressed. “We shall notify when we recommence the opening of new accounts after obtaining RBI approval. We shall notify when we recommence the opening of new accounts after obtaining RBI approval,” it said.