Before regulatory action against the payments bank in 2024, Sharma had explored transitioning the entity into a small finance bank, which would have allowed Paytm to expand beyond payments into lending and deposit-taking. That option is no longer available.
The cancellation of Paytm Payments Bank’s licence last week also ends the structure under which One97 Communications operated its digital wallet business through the bank.
The company could still reapply for a prepaid payment instrument (PPI) licence to revive the wallet business, said industry sources. However, growth prospects for wallets have narrowed amid increased competition, limited monetisation opportunities and the wider adoption of alternatives such as UPI Lite.
The company said on Saturday it would voluntarily wind down Paytm Payments Bank and added that the licence cancellation is unlikely to have a material impact because its current operations function independently of the bank. Paytm’s wallet business was operated through Paytm Payments Bank, which issued the PPIs linked to the service.
The company did not respond to an email seeking comment on the matter.
Wallet business in focus
One97 Communications, the Noida-based operator of the Paytm brand, had been awaiting clarity on the regulatory restrictions imposed on the payments bank before restarting wallet operations, while also considering plans to move the wallet business “back home”.
During the third quarter of 2024-25, Sharma said any decision on the wallet business would depend on the final regulatory outcome for the payments bank. “We want to do it. We are waiting for Paytm Bank’s final outcome and on the basis of that we’ll take the next step,” he said at the time.
According to the payments bank’s annual report, it had 38 million full-KYC wallets and more than 87 million outstanding wallets as of FY25, with balances totalling ₹998.4 crore.
The bank faced regulatory restrictions in early 2024, which led to the suspension of most operations, including deposits and credit transactions. Customers could no longer add money to wallets, although they were able to withdraw existing balances, limiting usage over the past two years.
Limited growth in wallets
By the third quarter of 2025-26, Sharma described reviving the wallet business as a “promise to bring the wallet back home.” At the same time, management indicated that wallets were unlikely to remain a significant growth driver for the industry.
“We had talked about wallet profitability being ₹500 crore in January 2024. We don’t think the product is that big in the industry going forward. So we want to bring it for consumer completeness because the consumer should have an option,” Madhur Deora, president and group chief financial officer of Paytm, told analysts after the company’s Q3FY26 earnings.
Deora added that wallets were no longer as central to the business as they had been in earlier years. “We are big believers that consumers should have options, as many options as we can come up with. So postpaid is an option, wallet is an option, but one shouldn’t think of wallet as being as sticky, as relevant, as important today as it was three years ago,” he said.
An industry source said that while use-case-specific PPIs for categories such as gifting, meal benefits and transit payments continue to see adoption, wallet-based PPIs have lost ground as real-time payments through the UPI become more widely used. “Paytm can apply for the PPI licence but it will also have to understand what kind of play it wants to have in the market. E-wallets are not as popular as they used to be before,” the person said.
As of March 2026, Paytm Payments Bank had 100.73 million outstanding PPI wallets, according to Reserve Bank of India data. Of these, 6.8 million were active. In January 2024, the bank had 630.7 million outstanding wallets.
No immediate financial impact
Brokerage firm Emkay Global Financial Services said the cancellation of the associate entity’s licence would not have a direct financial impact on Paytm, though it noted that the language used in the RBI’s communication could create reputational concerns. “We believe the RBI’s citing management conduct ‘prejudicial to the interest of depositors as also the public interest’ and concluding that ‘no useful purpose or public interest would be served by continuation’ is severe. While Paytm is legally ring-fenced, the tone of the order creates perception risk, in our view,” the brokerage said.
The RBI had approved a payment aggregator licence for Paytm in 2025, indicating that the regulator was satisfied with the compliance posture of the listed entity.