When the Reserve Bank of India cancelled the licence of Paytm Payments Bank on April 24, 2026, it closed more than a bank. For millions of ordinary Indians, it ended what was nothing short of a small revolution.
In 2010, Vijay Shekhar Sharma started Paytm as a mobile recharge website. Then, when demonetisation hit in 2016 and cash vanished overnight, Paytm became a household name. Wallet users grew from 125 million to 185 million in just three months, crossing 280 million by November 2017.
The real story was not in these numbers. It was in the lanes of our cities and villages: the chaiwala outside the railway station, the vegetable vendor with his cart, and the kirana shop owner in a small town.
Suddenly, they all had a QR code on their wall. “Paytm Karo,” they told customers. In that simple moment, India’s poor and lower-middle class entered the digital economy. Over 44 million small merchants began accepting payments without expensive swipe machines.
For the first time, financial inclusion was not a slogan in some government file. Instead, it was happening on basic smartphones, in the hands of daily wage earners. That, in my view, was Paytm’s true achievement.
Why the RBI’s Action Hurts
That is why the RBI’s action, though justified, hurts.
The regulator did not act in haste. As early as March 2022, RBI had asked Paytm Payments Bank to stop adding new customers after a system audit raised serious concerns. However, by January 2024, the bank had still not fixed the problems.
KYC checks were poor. Anti-money laundering controls were weak. IT systems were too closely linked to parent company One97 Communications. In addition, data localisation rules were violated.
For ordinary customers, this is genuinely painful. The good news is that the bank has enough liquidity, and depositors will get their money back. Also, the bigger Paytm app, run by One97 Communications, will keep working because it relies on other banks. UPI, QR codes and payment devices will continue.
The Cost to Ordinary People
Still, think of the small vendor in a tier-3 town who built his digital habit on Paytm Payments Bank. Think also of the elderly customer who finally learned to scan a code. Then think of the gig worker whose salary, FASTag and small savings sat in a PPBL account.
Even if the migration happens “smoothly” on paper, the inconvenience is real. More importantly, trust, once shaken, takes years to rebuild.
When any company touches millions of common people, the responsibility of the regulator increases many times over. The RBI, SEBI, the Ministry of Finance and every other watchdog cannot look the other way.
Their job is not just to punish after the damage. Instead, it is to ensure that such companies survive through firm, early and regular checks.
When a brand like Paytm collapses, the founders and investors do not suffer the most. They have lawyers, balance sheets and exit options. The real loss is borne by the small vendor, the housewife, the student, the senior citizen and the migrant worker. They lose money and time. Worse, they lose the courage to trust the next innovation.
The Questions Investors Must Answer
There are also uncomfortable questions that go beyond the RBI. When global and Indian investors poured crores into the listed parent company, where were their lawyers and accountants?
Did they conduct honest due diligence, or did brand value, IPO noise and high valuations override careful checks? What were the Board and the Independent Directors doing while compliance lapses piled up, audit after audit?
These are not rhetorical questions. RBI and SEBI must investigate them seriously and publicly. After all, accountability cannot stop at the bank’s doorstep.
The Deeper Indian Problem
However, regulators alone are not the problem.
In my thirty years of advising Indian and global businesses, I have seen one pattern repeat itself with painful regularity. We Indians, despite our brilliance, scale and ambition, fail at three simple things: integrity, discipline and transparency.
Too often, we treat compliance as red tape. We confuse jugaad with genius. We push every rule to its breaking point and then ask for sympathy when it snaps. Our long-term plans are often reduced to quarterly results. That is the real challenge.
We talk of becoming an “Incredible India”, a five-trillion-dollar economy and a global powerhouse. But none of these dreams will come true unless we, as founders, professionals and citizens, fix these basics first.
No amount of valuation, branding or PR can cover up a culture that does not respect rules.
A Warning for India
Paytm changed how India pays. That legacy is real and must not be forgotten. However, the end of its bank is a quiet warning to every entrepreneur, every regulator and every one of us.
We can be incredible.
But only if we choose to be honest first.
The author is a Senior Corporate & M&A Lawyer. Email: nitin@nitinpotdar.com