Ashvin Parekh, founder of Ashvin Parekh Advisory Services, broke it down clearly in an interview with ET Now.
What just happened and why it was coming
This didn’t come out of nowhere. The RBI had been tightening the noose on Paytm Payments Bank since 2022, when it first barred the bank from onboarding new customers. In 2024, the regulator ordered it to wind down operations entirely. The license cancellation in April 2026 is simply the final, formal step in a process that has been playing out for nearly four years.
“In all right earnest, this is only a procedural part — now this had to happen,” Parekh said. He compared the situation to a couple that had already been living separately for years: “The bride and groom were already living separately. It is just a formal divorce announcement.”
What happens to the bank now
With the license cancelled, Paytm Payments Bank will now go through a formal winding-down process under the Companies Act. A court order to wind up the company will be obtained, after which liabilities will be settled in a specific legal order.
First in line: deposit holders and wallet credit balance holders. According to Parekh, there is enough money in the bank to repay these customers in full. After all depositors and wallet users are paid back, statutory dues and creditor obligations will be met next.
Whatever remains after all liabilities are cleared will be returned to the shareholders — One97 Communications, which holds a 49% stake, and founder Vijay Shekhar Sharma, who holds 51% — in proportion to their shareholding.
Your Paytm app is safe; here’s why
This is the part most users need to hear clearly. The Paytm app — the one you use for UPI payments, bill payments, and transactions — runs under Paytm Payment Services Limited, which holds a separate payments aggregator license from the RBI. That entity is completely distinct from Paytm Payments Bank.
“Paytm services under the aggregator’s license are distinctly different from Paytm Bank’s activities,” Parekh said. In fact, the bank had effectively stopped functioning for everyday users from 2025 onwards anyway, so most customers had already been using the app through the payments aggregator infrastructure without realising it.
Crucially, Paytm’s payment platform is what Parekh calls a “pass-through” — it doesn’t hold any customer balances itself. Every transaction ultimately settles through NPCI, either via UPI or IMPS. Paytm is just the interface riding on top of that infrastructure. As long as users choose to use it, the platform can continue operating without any systemic disruption.
The one real damage: reputation
Parekh is candid about the one area where the impact is significant: brand reputation.
“Reputation risk is huge,” he said plainly. A banking license cancellation by the RBI is not a small headline, and the association of the Paytm brand with regulatory failure will linger — even if the payments business is technically insulated from it.
The bottom line
Paytm Payments Bank is dead. The legal process to formally close it has begun. Depositors and wallet users will get their money back. Shareholders will receive whatever’s left. And your Paytm app for everyday payments? It runs on a different license, a different entity, and a different regulatory track — and for now, it continues as usual.