Paytm, India’s leading digital payments platform, has reported a widening loss and shrinking revenue in the latest quarter, highlighting the struggles the company faces in the wake of a regulatory clampdown on its financial services business.

The company’s losses for the October-December 2022 quarter grew to INR 778 crore (USD 94 million) compared to INR 466 crore in the previous quarter. This increase is attributed to the regulatory pressure on its lending operations, which saw a significant decline in disbursement.

Paytm’s revenue for the quarter also declined to INR 1,895 crore from INR 2,029 crore in the preceding quarter. This fall is mainly due to the drop in loan disbursement and the company’s decision to temporarily suspend new customer onboarding for its lending business.

The regulatory crackdown on Paytm’s financial services has been a major blow to the company’s growth strategy. The Reserve Bank of India (RBI) has been tightening regulations on digital lenders, particularly those operating under the Non-Banking Financial Company (NBFC) framework. This scrutiny has led to the suspension of Paytm’s lending operations by some of its key partners, impacting its ability to attract and retain customers.

Paytm’s CEO, Vijay Shekhar Sharma, admitted to the challenges the company is facing but expressed confidence in its ability to overcome them. He highlighted the company’s ongoing efforts to comply with regulatory requirements and build a sustainable lending business.

“We are fully committed to ensuring compliance with all applicable regulations and building a robust lending business,” Sharma said. “We are confident that we will be able to navigate these challenges and continue to grow our business.”

However, the recent financial performance raises concerns about Paytm’s future trajectory. The company is now under pressure to find alternative revenue streams and diversify its portfolio beyond lending. This includes expanding its payments business, strengthening its merchant network, and exploring new opportunities in areas like financial inclusion and microfinance.

The coming months will be crucial for Paytm as it navigates these challenges and charts a course for sustained growth. The company’s success will depend on its ability to adapt to the changing regulatory landscape, regain investor confidence, and re-establish itself as a leader in India’s burgeoning digital economy.