Auditors clash with Paytm Bank over business viability

According to the Economic Times, Paytm Payments Bank Limited (PPBL) is in conflict with its auditor, JC Bhalla & Co. The auditor has indicated that it may need to qualify the accounts for FY24 with remarks questioning the company’s viability due to regulatory restrictions that have brought its business to a near standstill. This qualification pertains to whether PPBL can be considered a ‘going concern.’

PPBL is challenging the auditor’s stance, asserting that the strength of the Paytm brand and planned capital infusion will support its revival. PPBL is 49% owned by One97 Communications and 51% by founder-promoter Vijay Shekhar Sharma. A negative qualification could jeopardise PPBL’s efforts to secure a payment aggregator licence for Paytm Payments Services. PPBL did not respond to queries, while JC Bhalla & Co. declined to comment, citing professional code of conduct.

Efforts are reportedly being made to persuade the auditors to accept a management representation or legal opinion on the business’s viability. Senior management at One97 Communications is seeking intervention from the Reserve Bank of India (RBI). However, RBI is unlikely to intervene before the annual report is filed, as the issue lies between the management and the auditor.

Since March 15, RBI has prohibited PPBL from accepting new deposits due to non-compliance with know-your-customer (KYC) guidelines, which require face-to-face verification and valid document collection. As a result, PPBL’s net worth has declined with no income generated, and RBI has directed PPBL to wind down operations and transfer all businesses to One97 Communications.