India’s banking regulator, the Reserve Bank of India (RBI), has suspended significant parts of digital payment giant Paytm’s business, citing persistent non-compliance and supervisory concerns. The decision followed warnings to Paytm about questionable dealings between its popular payments app and its less-known banking arm. A technical audit revealed problematic money and data flows between Paytm Payments Bank Ltd. and the broader Paytm universe, causing accounting and supervisory challenges. The regulator expressed worry about management overlap, with the same set of officers overseeing both the bank and the fintech company, raising potential conflicts of interest. Paytm’s shares plunged 20%, and the RBI ordered the bank arm to halt operations after February 29. The move poses a significant setback for Paytm and its charismatic founder, Vijay Shekhar Sharma, as they seek sustained profitability and attempt to address regulatory concerns. The company plans to appeal the decision but faces a challenging road ahead to restore regulatory trust.

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