CAIT advises traders to abandon Paytm and move to other payment apps after RBI's extreme action

It seems that the troubles for Vijay Shekhar Sharma's Paytm are far from over. After losing over Rs 20,000 crore in market capitalization, The company now faces another challenge that could significantly impact its reputation in the market.

The Confederation of All India Traders (CAIT) has issued an advisory to traders across India, urging them to switch from Paytm to other payment applications. 

What is CAIT's concern?

CAIT warns that RBI's action may cause financial disruption for a large number of small traders, vendors, hawkers, and women relying on Paytm for financial transactions. 

"The RBI has imposed certain restrictions, prompting CAIT to recommend that users take proactive measures to protect their funds and ensure uninterrupted financial transactions. Large number of small traders, vendors, Hawkers and women are making payments through Paytm and as such RBI restrictions on Paytm could lead to financial disruptions for these people," the CAIT said on February 4.

RBI's restrictions on Paytm

The RBI's decision to impose restrictions on Paytm Payments Bank Ltd (PPBL) includes halting most of its business operations, such as accepting further deposits, conducting credit transactions, and carrying out top-ups on customer accounts, prepaid instruments, wallets, and cards for paying road tolls after February 29. 

The reason behind extreme RBI's action

A Reuters report said that the RBI's decision to impose restrictions was significantly influenced by the discovery of hundreds of thousands of accounts created without proper verification. These accounts lacked adequate Know-Your-Customer (KYC) documentation and were involved in transactions amounting to crores of rupees, raising concerns over potential money laundering activities.

The investigation further revealed that over 1,000 users had linked the same Permanent Account Number (PAN) to their accounts.

The report added that RBI is concerned about the possibility that some of these inadequately verified accounts may have been used for money laundering purposes.

Moving to other payment applications

CAIT Secretary General Praveen Khandelwal emphasized the urgency of the advisory, urging traders to act promptly and make informed decisions to mitigate any potential adverse effects on their financial operations.

The association also suggested moving to other payment apps or considering direct UPI transactions, further recommending using payment applications offered by individual banks to ensure uninterrupted and secure financial transactions.

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