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On Paytm Services In Promoting Cashless

Economy After demonization In India

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A bank is a financial institution and a financial
intermediary that accepts deposits and channels those
deposits into lending activities, either directly by loaning
or indirectly through capital markets.

A bank may be defined as an institution that accepts

deposits, makes loans, pays checks, and provides
financial services. A bank is a financial intermediary for
the safeguarding, transferring, exchanging, or lending of
money. A primary role of banks is connecting those with
funds, such as investors and depositors, to those seeking
funds, such as individuals or businesses needing loans. A
bank is the connection between customers that have
capital deficits and customers with capital surpluses.

Banks distribute the medium of exchange. Banking is a

business. Banks sell their services to earn money, and
they must market and manage those services in a
competitive field. Banks are financial intermediaries that
safeguard, transfer, exchange, and lend money and like
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other businesses that must earn a profit to survive.

Understanding this fundamental idea helps you to
understand how banking systems work, and helps you
understand many modern trends in banking and finance.
The services banks offer to customers have to do almost
entirely with handling money or finances for other
people. Banks are critical to our economy. The primary
function of banks is to put their account holders' money
to use by lending it out to others who are in need of the

Money is a medium of exchange, an agreed-upon system

for measuring the value of goods and services. Once, and
still in some places today, precious stones, animal
products, or other goods of value might be used as a
medium of exchange. This system was used for centuries,
before the invention of money. People used to exchange
the goods or services for other goods or services in
return. This system is also known as “Barter System” and
an age-old method that was adopted by people to
exchange their services and goods. Roman soldiers were
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sometimes paid in salt, because it was critical to life and

was a scarce commodity at those times.

Anything with an agreed-upon value might be a medium

of exchange. Today, many forms of money are used.
Money is any object or record that is generally accepted
as payment for goods and services and repayment of
debts in a given socio-economic context or country. The
main functions of money are distinguished as: a medium
of exchange; a unit of account; a store of value; and,
occasionally in the past, a standard of deferred payment.
Any kind of object or secure verifiable record that fulfills
these functions can be considered money. Money simply
shows how much something is worth, whether it is a new
gadget that you can purchase or two hours of your labor.
When you have money, a bank can act as your agent for
using or protecting that money.
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A bank is a business. But unlike some businesses,

banks don’t manufacture products or extract
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natural resources from the earth. Banks sell

financial services such as car loans, home
mortgage loans, business loans, checking
accounts, credit card services, certificates of
deposit, and individual retirement accounts.

Banking plays such a major role in channeling

funds to borrowers with productive investment
opportunities, this financial activity is important
in ensuring that the financial system and the
economy run smoothly and efficiently. As a
result of different kinds of banks in existence
nowadays, it would be difficult, or at least
cumbersome, to formulate a definition of
banking which connotes the diverse activities of
all kinds of banks.

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"A person or company carrying on the

business of receiving moneys, and collecting
drafts, for customers subject to the obligation
of honoring cheques drawn upon them from
time to time by the customers to the extent of
the amounts available on the current

"Chamber's Twentieth Century Dictionary

defines a bank as an "institution for the
keeping, lending and exchanging, etc of

History of banking
The concept of banking may have begun in
ancient Assyria and Babylonia, with merchants
offering loans of grain as collateral within a
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barter system. Lenders in ancient Greece and

during the Roman Empire added two important
innovations: they accepted deposits and changed
money. Archaeology from this period in ancient
China and India also shows evidence of money

More modern banking can be traced to medieval

and early Renaissance Italy, to the rich cities in
the centre and north like Florence, Lucca, Siena,
Venice and Genoa. The Bardi and Peruzzi
families dominated banking in 14th-century
Florence, establishing branches in many other
parts of Europe. One of the most famous Italian
banks was the Medici Bank, set up by Giovanni
di Bicci de' Medici in 1397. The earliest known
state deposit bank, Banco di San Giorgio (Bank of
St. George), was founded in 1407 at Genoa, Italy.

banking practices, including fractional reserve

banking and the issue of banknotes, emerged in
the 17th and 18th centuries. Merchants started
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to store their gold with the goldsmiths of

London, who possessed private vaults, and
charged a fee for that service. In exchange for
each deposit of precious metal, the goldsmiths
issued receipts certifying the quantity and purity
of the metal they held as a bailee; these receipts
could not be assigned, only the original
depositor could collect the stored goods.

Sealing of the Bank of England Charter (1694), by

Lady Jane Lindsay, 1905.

Gradually the goldsmiths began to lend the

money out on behalf of the depositor, which led
to the development of modern banking
practices; promissory notes (which evolved into
banknotes) were issued for money deposited as
a loan to the goldsmith. The goldsmith paid
interest on these deposits. Since the promissory
notes were payable on demand, and the
advances (loans) to the goldsmith's customers
were repayable over a longer time period, this
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was an early form of fractional reserve banking.

The promissory notes developed into an
assignable instrument which could circulate as a
safe and convenient form of money backed by
the goldsmith's promise to pay, allowing
goldsmiths to advance loans with little risk of
default. Thus, the goldsmiths of London became
the forerunners of banking by creating new
money based on credit.

The Bank of England was the first to begin the

permanent issue of banknotes, in 1695. The
Royal Bank of Scotland established the first
overdraft facility in 1728. By the beginning of the
19th century a bankers' clearing house was
established in London to allow multiple banks to
clear transactions. The Rothschilds pioneered
international finance on a large scale, financing
the purchase of the Suez canal for the British
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Banks in the economy

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Economic functions
The economic functions of banks include:

1) Issue of money, in the form of banknotes and

current accounts subject to cheque or payment
at the customer's order. These claims on banks
can act as money because they are negotiable or
repayable on demand, and hence valued at par.
They are effectively transferable by mere
delivery, in the case of banknotes, or by drawing
a cheque that the payee may bank or cash.

2) Netting and settlement of payments – banks

act as both collection and paying agents for
customers, participating in interbank clearing
and settlement systems to collect, present, be
presented with, and pay payment instruments.
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This enables banks to economize on reserves

held for settlement of payments, since inward
and outward payments offset each other. It also
enables the offsetting of payment flows between
geographical areas, reducing the cost of
settlement between them.

3) Credit intermediation – banks borrow and

lend back-to-back on their own account as
middle men.

4) Credit quality improvement – banks lend

money to ordinary commercial and personal
borrowers (ordinary credit quality), but are high
quality borrowers. The improvement comes
from diversification of the bank's assets and
capital which provides a buffer to absorb losses
without defaulting on its obligations. However,
banknotes and deposits are generally unsecured;
if the bank gets into difficulty and pledges assets
as security, to raise the funding it needs to
continue to operate, this puts the note holders
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and depositors in an economically subordinated


5) Asset liability mismatch/Maturity

transformation – banks borrow more on
demand debt and short term debt, but provide
more long term loans. In other words, they
borrow short and lend long. With a stronger
credit quality than most other borrowers, banks
can do this by aggregating issues (e.g. accepting
deposits and issuing banknotes) and
redemptions (e.g. withdrawals and redemption
of banknotes), maintaining reserves of cash,
investing in marketable securities that can be
readily converted to cash if needed, and raising
replacement funding as needed from various
sources (e.g. wholesale cash markets and
securities markets).

6) Money creation/destruction – whenever a

bank gives out a loan in a fractional-reserve
banking system, a new sum of money is created
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and conversely, whenever the principal on that

loan is repaid money is destroyed.

Banks crisis
Number of countries having a banking crisis in
each year since 1800. This is based on This time
is different: Eight centuries of financial folly,
which covers only 70 countries. The general
upward trend might be attributed to many
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factors. One of these is a gradual historical

increase in the percent of people who receive
money for their labor. Another, elsewhere
suggested reason related to more recent
development trends and to banking crisis during
modern era might be changes in the size of
banking sector compared to overall GDP. The
dramatic feature of this graph is the virtual
absence of banking crises during the period of
the Bretton Woods agreement, 1945 to 1971.
This analysis is similar to Figure 10.1 in Reinhart
and Rogoff (2009). For more details see the help
file for "bankingCrises" in the Ecdat package
available from the Comprehensive R Archive
Network (CRAN).
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This is a list of banking crises. A banking crisis is

a financial crisis that affects banking activity.
Banking crises include bank runs, which affect
single banks; banking panics, which affect many
banks; and systemic banking crises, in which a
country experiences a large number of defaults
and financial institutions and corporations face
great difficulties repaying contracts. A banking
crisis is marked by bank runs that lead to the
demise of financial institutions, or by the demise
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of a financial institution that starts a string of

similar demises.

Banks are susceptible to many forms of risk

which have triggered occasional systemic crises.
These include liquidity risk (where many
depositors may request withdrawals in excess of
available funds), credit risk (the chance that
those who owe money to the bank will not repay
it), and interest rate risk (the possibility that the
bank will become unprofitable, if rising interest
rates force it to pay relatively more on its
deposits than it receives on its loans).

Banking crises have developed many times

throughout history when one or more risks have
emerged for a banking sector as a whole.
Prominent examples include the bank run that
occurred during the Great Depression, the U.S.
Savings and Loan crisis in the 1980s and early
1990s, the Japanese banking crisis during the
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1990s, and the sub-prime mortgage crisis in the


Size of global banking industry

Assets of the largest 1,000 banks in the world

grew by 6.8% in the 2008/2009 financial year to a
record US$96.4 trillion while profits declined by
85% to US$115 billion. Growth in assets in
adverse market conditions was largely a result
of recapitalization. EU banks held the largest
share of the total, 56% in 2008/2009, down from
61% in the previous year. Asian banks' share
increased from 12% to 14% during the year,
while the share of US banks increased from 11%
to 13%. Fee revenue generated by global
investment banking totalled US$66.3 billion in
2009, up 12% on the previous year.

The United States has the most banks in the

world in terms of institutions (5,330 as of 2015)
and possibly branches (81,607 as of 2015). This is
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an indicator of the geography and regulatory

structure of the US, resulting in a large number
of small to medium-sized institutions in its
banking system. As of November 2009, China's
top 4 banks have in excess of 67,000 branches
(ICBC:18000+, BOC:12000+, CCB:13000+,
ABC:24000+) with an additional 140 smaller
banks with an undetermined number of
branches. Japan had 129 banks and 12,000
branches. In 2004, Germany, France, and Italy
each had more than 30,000 branches – more
than double the 15,000 branches in the UK.

Mergers and Acquisitions

Between 1985 and 2018 banks engaged in

around 28,798 mergers or acquisitions, either as
the aqcuirer or the target company. The overall
known value of these deals cumulates to around
5,169 bil. USD. In terms of value, there have been
two major waves (1999 and 2007) which both
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peaked at around 460 bil. USD followed by a

steep decline (-82% from 2007 until 2018).
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Here is a list of the largest deals in history in

terms of value with participation from at least
one bank:
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Capital And Risks

Banks face a number of risks in order to conduct
their business, and how well these risks are
managed and understood is a key driver behind
profitability, and how much capital a bank is
required to hold. Bank capital consists
principally of equity, retained earnings and
subordinated debt.

After the 2007-2009 financial crisis,

regulators force banks to issue Contingent
convertible bonds (CoCos).These are hybrid
capital securities that absorb losses in
accordance with their contractual terms when
the capital of the issuing bank falls below a
certain level. Then debt is reduced and bank
capitalization gets a boost. Owing to their
capacity to absorb losses, CoCos have the
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potential to satisfy regulatory capital


Some of the main risks faced by banks include:

Credit risk: risk of loss arising from a borrower

who does not make payments as promised.

Liquidity risk: risk that a given security or asset

cannot be traded quickly enough in the market
to prevent a loss (or make the required profit).

Market risk: risk that the value of a portfolio,

either an investment portfolio or a trading
portfolio, will decrease due to the change in
value of the market risk factors.

Operational risk: risk arising from execution of

a company's business functions.

Reputational risk: a type of risk related to the

trustworthiness of business.
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Macroeconomic risk: risks related to the

aggregate economy the bank is operating in.

The capital requirement is a bank regulation,

which sets a framework within which a bank or
depository institution must manage its balance
sheet. The categorization of assets and capital is
highly standardized so that it can be risk
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Types of banking
Banks' activities can be divided into:

retail banking, dealing directly with individuals

and small businesses;

business banking, providing services to mid-

market business;

corporate banking, directed at large business


private banking, providing wealth management

services to high-net-worth individuals and

investment banking, relating to activities on the

financial markets.
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Most banks are profit-making, private

enterprises. However, some are owned by

government, or are non-profit organizations.

Types of banks
National bank of the republic, salt lake city 1908

ATM Al-Rajhi Bank

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The National copper bank, salt lake city 1911

The branch of union bank in, Visakhapatnam

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Name:- Nandu M bhoite, class :- TYBBI, project work - sem 6

Name:- Nandu M bhoite, class :- TYBBI, project work - sem 6


Paytm is available in 10 Indian languages

and offers online use-cases like mobile
recharges, utility bill payments, travel, movies,
and events bookings as well as in-store payments
at grocery stores, fruits and vegetable shops,
restaurants, parking, tolls, pharmacies and
education institutions with the Paytm QR code.
California based PayPal had filed a case against
Paytm in the Indian trademark office for using a
logo similar to its own on 18 November 2016. As
of January 2018, Paytm is valued at $10 billion.

As per the company, over 7 million

merchants across India use this QR code to
accept payments directly into their bank
account. The company also uses advertisements
and paid promotional content to generate
revenues. the Banks a newer possibility has been
opened for the middle class and the poor people
using the new innovation. With the presentation
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of advanced wallets in mid-90's spearheaded by

Sam Pitroda with the vision, fundamental the
necessities of the clients a simple to utilize
interface, capacity to safely execute in the
virtual and certifiable, in came application
wallets, for example, Paytm. The buyer brand of
India's driving portable web organizations, for
example, One 97 Communications. One 97
speculators incorporate Ant financial (Ali Pay),
SAIF Partners, Mediatek, Sapphire Venture and
Silicon Valley Bank. Paytm comprehend the
significance of a contrasting option to the
current money exchanges and presented an
exceptionally basic versatile Mobile application
based secure medium of advanced method of
exchange which is the place where the future
untruths. A commercial center model and a
Revenue based show which gives clients an
opportunity to save money choice, energizes,
charge installments, Cashbacks when things are
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acquired, installment arrangements, Digital gold,

Paytm Bank and e-wallet. With a helpful
commercial center for dealers and Paytm is the
first organization in India who took the
reception of a Mobile Wallet currently having
120 million purchasers and 2 million every day
exchanges. For adjusted class of items Revenue
from this subcategory is produced as expenses
and commissions from the dealers. Paytm has
focused more on Digital currency thus it can
increase its brand preference through the better
distribution, promotional and better marketing
strategies.Wallet which can be utilized to store
money in computerized shape and consequently
can be utilized to purchase merchandise and
ventures from shops or foundations which have
a particular contract with the organization to
acknowledge these installment instruments.
Paytm wallet doesn't allow money withdrawal.
Clients deposits cash in the Paytm Wallet is
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saved by Paytm in an Escrow account, based on

the RBI rules and paytm gets premium and this
is considered as an agreement between bank
and Paytm.Accepts deposit and gives out loans
for the money deposited. Paytm cannot give
loans. Here QR codes are used for payment
which is nowadays available in each shop both
in Rural and Urban areas. Debit cards are also
available for Paytm.Online Payments are
accepted and the option for payment comes with
no maintenance charge but there is a
commission cut on each transaction.Initially
Paytm had only recharge services and mindset
of the people been that Paytm was only for
Recharge, but now things have changed using
Paytm we can even pay educational fees and
bills. For both buyers and sellers Paytm is still
serving as alternative means of cash transaction
and offers a convenient,
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Type of business Private

Type of site E-commerce
Founded 2010
Headquarters Noida, Uttar Pradesh,
Area served India, Canada
Founder(s) Vijay Shekhar Sharma
Key people Vijay Shekhar Sharma
Industry Internet
Products Paytm Mall

Paytm Payments Bank

Paytm Money

Paytm Gamepind
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Services Online shopping,

payment systems,
digital wallets
Revenue ₹814 crore (US$110
million) (FY 2017)[1]
Parent One97 Communications


Paytm was founded in August 2010 with an

initial investment of $2 million by its founder
Vijay Shekhar Sharma in NOIDA, a region
adjacent to India's capital New Delhi. It started
off as a prepaid mobile and DTH recharge
platform, and later added data card, postpaid
mobile and landline bill payments in 2013.

By January 2014, the company launched the

Paytm Wallet, and the Indian Railways and Uber
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added it as a payment option. It launched into E-

commerce with online deals and bus ticketing. In
2015, it unveiled more use-cases like education
fees, metro recharges, electricity, gas, and water
bill payments. It also started powering the
payment gateway for Indian Railways.

In 2016, Paytm launched movies, events and

amusement parks ticketing as well as flight
ticket bookings and Paytm QR. Later that year, it
launched rail bookings and gift cards.

Paytm's registered user base grew from 11.8

million in August 2014 to 104 million in August
2015. Its travel business crossed $500 million in
annualised GMV run rate, while booking 2
million tickets per month.

In 2017, Paytm became India's first payment app

to cross over 100 million app downloads. The
same year, it launched Paytm Gold, a product
that allowed users to buy as little as ₹1 of pure
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gold online. It also launched the Paytm Payments

Bank and ‘Inbox’, a messaging platform with in-
chat payments among other products. By 2018, it
started allowing merchants to accept Paytm, UPI
and Card payments directly into their bank
accounts at 0% charge. It also launched the
‘Paytm for Business’ app, allowing merchants to
track their payments and day-to-day settlements
instantly. This led its merchant base to grow to
more than 7 million by March 2018.

The company launched two new wealth

management products - Paytm Gold Savings Plan
and Gold Gifting to simplify long-term savings. It
launched into gaming and investments,
partnering with AGTech to launch a mobile
games platform Gamepind, and setting up Paytm
Money with an investment of ₹9 Crores to bring
investment and wealth management products
for the Indians.
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Softbank has made its biggest investment in an

Indian digital enterprise by sealing a funding
round of Rs 9,000 crore ($1.4 billion) in One 97
Communications which owns mobile payments
provider Paytm. The Japanese internet and
telecom conglomerate will now own about a fifth
of the Noida-based company estimated to be
worth $7 billion, making it the country’s second
most valuable startup.

Softbank is expected to buy shares in a

secondary transaction about $400 million to gain
a full 20% stake in the company, according to a
person directly aware of the transaction. This
secondary shares will be purchased primarily
from Paytm's early investor SAIF Partners
besides founder Vijay Shekhar Sharma, and is
part of the $1.4 billion raise.
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Masayoshi Son- led company will also get a

board position in One 97, in which China’s
Alibaba along with its payments affiliate Alipay
owned a 45% stake before this transaction.

“We are excited to partner with Paytm,” said

Son, chairman of SoftBank Group Corp, which is
now the single largest investor in India’s digital
commerce sector having backed online
marketplace Snapdeal, ride hailing app Ola as
well as hyper local delivery service Grofers and
hotel aggregator Oyo. So far, the group has
invested a total of about $ 3.5 billion in these

If the proposed plan to sell a troubled Snapdeal

to India’s largest online retailer Flipkart proves
successful, Softbank will own significant stakes
in India’s two most valuable internet businesses
– Paytm and Flipkart, which was estimated to be
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worth about $ 11.6 billion during its last fund

raise announced in April.

So far, the biggest investors in Indian

ecommerce businesses have been the Alibaba
group--which owns a majority stake along with
Alipay in Paytm Ecommerce, the digital
commerce platform spun out off One 97 last year
—and New York-based investment firm Tiger
Global, the largest shareholder in Flipkart.

Softbank is best known in global internet circles

for its near 28% stake in Alibaba worth about
$90 billion, the two founders Son and Alibaba's
Jack Ma are believed to share a close rapport.

Experts are of the view that bringing Softbank

on board helps payments provider Paytm
counter the perception of it being a company
majority owned by Chinese investors. The
combined holding of Chinese e-commerce giant
Alibaba and its payments affiliate Ant Financial
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will now be down to 40%. While Paytm's early

backer SAIF Partners will own over 20%.

"We now probably have the most long-term,

large capital on any company's capitalisation
table in India," Sharma told ET in an interview.

Sharma will own about 16 % of the company

which has now raised a total of $2 billion.

Earlier this year, Sharma had also separately

raised about $ 200 million in funding from
Alibaba and Saif Partners for his ecommerce
business – Paytm Ecommerce—in which
Softbank is not an investor. Paytm Ecommerce
which runs Paytm Mall will compete with
Flipkart and the Jeff-Bezos led Amazon for top
honour in India’s $ 16 billion online retail

The investment in One 97 by SoftBank comes at

a time when Son is looking to consolidate his
Indian portfolio and back market leaders, as the
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group raises the world’s largest technology fund

of $100 billion.

"This funding is a sentiment mover, coming soon

after Flipkart's round,” said Subramanya SV, a
former VC investor at Bessemer who was a
board member of Snapdeal and TaxiForSure,
which merged with Ola.

Flipkart raised a total of $1.4 billion led by

Tencent, eBay and Microsoft.

“The sentiment (in the Indian startup space) was

low in the last year and a half, and the new
funding of Paytm by Softbank shows that there is
capital available," said Subramanya.

One 97 plans to invest Rs 10,000 crore over the

next 3-5 years in bringing 500 million customers
on board, more than double from the current
220 million. The company also recently received
the final license from government regulator RBI
to launch Paytm Payments Bank, which will be a
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mobile-first product. One 97 Communications

owns 49% stake in Paytm Payments Bank, while
51% is personally held by Sharma as per RBI
guidelines. No

Total payments through digital instruments are

expected to reach $500 billion by 2020 in India,
according to a study by Boston Consulting Group,
with customer’s payment to merchants driving
this growth.

“In line with the Indian government's vision to

promote digital inclusion, we are committed to
transforming the lives of hundreds of millions of
Indian consumers and merchants by providing
them digital access to a broad array of financial
services, including mobile payments," Son said
in a statement.

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More than a year has passed since Paytm

Payments Bank (PPB) was launched by Paytm in
an event where Arun Jaitley was Chief Guest and
eight months later an RBI diktat barred the
digital payments platform from onboarding new

From the beginning, RBI and UIDAI together

have been keeping a sharp eye on all the
payments banks such as Paytm, Airtel, and Fino
among others.

However, Airtel and Fino also had to suspend

operations for a while due to government
diktats, their functions were allowed to be
restored with the regulator's permission after
they made the desired changes.

Paytm, on the other hand, had no such luck.

Even after removal of Renu Satti from the
position of the CEO of the company, and
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appointment of ex-CPO of NPCI and DGM of SBI,

Satish Kumar Gupta, as the new CEO, the ban on
PPB hasn't been lifted.

To figure out the reasons behind the same, TOI

filed an RTI with the RBI and received a four-
point response enlisting the factors behind the
aforementioned ban.

First and foremost was the direct violation of

Know-Your-Customer (KYC) rules by the
company while registering new customers. How
PPB violated these rules is still uncertain.

Secondly, RBI was highly skeptical via-a-vis the

ownership structure of Paytm Payments Bank
Pvt. Ltd. as the company is 51 per cent owned by
Sharma in personal capacity, and the rest is
owned by One97 Communications Ltd. and its
other subsidiaries, which are further owned by
Name:- Nandu M bhoite, class :- TYBBI, project work - sem 6

The problem that RBI has with the same is

payments banks are expected to maintain a
certain distance - independent operational
structures - from the promoter entities, while in
the case of Paytm, it is clear how there is none.

Further, Paytm did not adhere to the Rs 100

crore net worth limit and that, again as a direct
violation of rules, didn't bode well with RBI.

Last but not the least, PPB also couldn't resist

from violating the rule that mentioned how
Payments Banks are not allowed to hold more
than Rs 1 lakh in each account.

The Payments Banks haven't been doing well as

expected, Paytm lags far behind in its deposits
from Airtel, as per data revealed in May 2018,
and yet the Alibaba-backed company has seen
massive revenues in FY18.