India’s markets regulator has issued show-cause notices to senior Paytm executives over the timing of a December 2023 announcement on scaling back small personal loans, causing a decline in share prices and raising questions about corporate disclosure practices amid RBI’s tightening of consumer credit rules.
Shares of One 97 Communications fell on Thursday after India’s markets regulator issued show-cause notices to senior Paytm executives over the timing of a December 2023 announcement that the company would scale back small personal loans, according to the company and people familiar with the matter. The notice named chief executive Vijay Shekhar Sharma and chief financial officer Madhur Deora, and asked for a response within 14 days, Paytm said.
The disclosure centres on whether the lender’s December 6, 2023 announcement should have been treated earlier as unpublished price-sensitive information. In that filing, Paytm said it would issue fewer sub-Rs 50,000 personal loans after the Reserve Bank of India tightened rules on unsecured consumer lending, a move that immediately rattled investors and sent the stock sharply lower in the following session.
The regulatory backdrop has been under scrutiny since late 2023, when the RBI increased capital requirements for certain consumer loans to cool rapid growth in unsecured credit. Market reaction to Paytm’s shift was severe at the time, with the shares hitting lower circuit limits and brokerages cutting forecasts, saying the pullback in low-ticket lending could weigh on revenue growth, operating profit and the company’s broader expansion thesis.
Paytm has since been trying to rebuild its lending business around larger personal loans and merchant credit aimed at lower-risk customers, according to a December 2023 investor presentation. But the business has continued to face pressure from tighter rules and operational disruption after the RBI ordered restrictions on Paytm Payments Bank in early 2024, complicating loan distribution and forcing the company to adjust its plans.
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