The central bank of India has directed Paytm, the firm that transformed digital payments in the nation, to halt all operations provided by its banking division, commonly known as the wallet service. This action is a result of the company's "persistent non-compliance" with regulatory rules. With a user base exceeding 330 million, Paytm has faced recurrent allegations of financial wrongdoing, including the falsification of customer information and money laundering, as asserted by the Reserve Bank of India.

Besides Paytm, which finds itself in a precarious situation with investors withdrawing substantial funds due to the company's plummeting shares following the regulatory order, thousands of small business owners who depended on the app for swift and convenient transactions are also poised to bear the brunt of this regulatory crackdown.

Paytm has faced regulatory issues with the banking authority before. Since 2018, the RBI has admonished the company on at least four occasions for a range of lapses. The current directive suggests that the firm has been granted ample time to address its errors.

The future of the company's wallet business is now at risk. Functioning akin to a bank account, the Paytm wallet simplifies the process for individuals to receive deposits, manage funds, and conduct transactions effortlessly by scanning a QR code.

Despite the company's defiant stance, refuting allegations and asserting that the Paytm app continues to operate without disruption, the founder Vijay Shekhar Sharma, who was once the youngest billionaire, is making efforts to reassure and pacify employees and investors. Reportedly, he has even sought assistance from the country's finance minister.

Today, on the BSE, Paytm's shares experienced a decline of up to 8.7%, reaching a low of Rs 385.75. This occurred following a downgrade by the global broking firm Macquarie, which shifted its rating for the troubled fintech from a neutral call to underperform. Additionally, the firm lowered the target price to Rs 275, citing a substantial risk of customer exodus that poses a significant threat to both monetization and the business model of the company.