Vijay Shekhar Sharma, founder and CEO of One97 Communications, faces a significant setback in his ambition to establish a comprehensive banking franchise as the Reserve Bank of India (RBI) revoked the licence of Paytm Payments Bank last week. This development effectively ends the company’s original wallet-led business model, which operated through the payments bank.

Prior to the licence cancellation, Sharma had considered converting Paytm Payments Bank into a small finance bank, a move that would have permitted Paytm to expand its operations beyond payments to include lending and deposit-taking activities. This option is no longer available following the RBI’s action in 2024.

The termination of Paytm Payments Bank’s licence also disrupts the framework under which One97 Communications managed its digital wallet services, as the bank had been issuing the prepaid payment instruments (PPIs) linked to Paytm’s wallets. While the company could seek to obtain a standalone PPI licence to revive wallet operations, industry experts noted that the growth potential for digital wallets has diminished due to intense competition, challenges in monetisation, and the increasing use of alternatives like UPI Lite.

Paytm announced on Saturday that it would voluntarily wind down Paytm Payments Bank, suggesting that the licence cancellation would not materially affect its broader operations, which it claims function largely independently of the bank. The company did not respond to requests for further comment.

One97 Communications, based in Noida, had been awaiting regulatory clarity regarding the payments bank’s restrictions before resuming wallet services. Sharma previously indicated that future decisions about the wallet business hinged on the final regulatory status of Paytm Payments Bank. In the third quarter of the 2024-25 financial year, he expressed a willingness to “bring the wallet back home” once regulatory matters were resolved.

According to Paytm Payments Bank’s annual report for FY25, the bank maintained 38 million fully KYC-compliant wallets and over 87 million outstanding wallets, with total balances nearing ₹998.4 crore. Regulatory constraints imposed in early 2024 led to a suspension of major functions, including deposits and credit transactions, preventing customers from adding funds to wallets but allowing withdrawals. This severely limited wallet usage over the past two years.

By the third quarter of 2025-26, Paytm’s management acknowledged the declining significance of wallets as a growth driver. Madhur Deora, Paytm’s president and group chief financial officer, told analysts that while restoring the wallet was seen as enhancing consumer options, wallets were no longer expected to generate the scale of profitability once projected. He noted that wallets are not as central to the company’s business as they were three years ago, emphasizing the importance of offering consumers a range of payment alternatives, including postpaid options.

Industry sources further pointed out that while category-specific PPIs—such as those for gifting, meal benefits, or transit payments—continue to see use, wallet-based PPIs have lost market share amid the rising adoption of real-time payments through the Unified Payments Interface (UPI).

According to RBI data from March 2026, Paytm Payments Bank held around 100.73 million outstanding PPI wallets, but only 6.8 million were active. This represents a sharp decline from January 2024, when the bank had approximately 630.7 million outstanding wallets.

Experts suggest that any revival of Paytm’s wallet business will require a clear strategic direction, given the reduced popularity of e-wallets compared to earlier years.