Vijay Shekhar Sharma, the CEO of Paytm, is reportedly in talks with the RBI about regulatory issues

Last Wednesday, the RBI instructed Paytm Payments Bank to cease taking new deposits in March from both its digital wallets and its accounts

Days after the regulator placed restrictions on its banking affiliate, Paytm CEO Vijay Shekhar Sharma met with the Indian central bank on Monday to discuss strategies for resolving regulatory issues, according to two persons with firsthand knowledge of the discussions on Tuesday.

Citing regulatory concerns and non-compliance with regulations, the Reserve Bank of India (RBI) instructed Paytm Payments Bank last Wednesday to cease taking new deposits in its accounts and well-known digital wallets as of March.

“Discussions are on about addressing RBI’s regulatory concerns, and the company has sought an extension of the February 29 deadline,” according to a source.

According to the source, Paytm has also been asking the RBI for clarification on the transfer of its licenses for the wallet industry and the digital highway toll payment service Fastag.

According to a second source, “The RBI heard Paytm out without making any commitments.”

A request for comment from Reuters was not immediately answered by Paytm or the RBI.

Due to worries about the impact on the broader business, as of Monday, Paytm’s shares had dropped by nearly 42%, wiping out $2.5 billion (roughly Rs. 20,762 crore) of its market value. The digital payments app, which competes with companies like Walmart’s PhonePe and Google, is primarily powered by Paytm Payments Bank.

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According to a person with knowledge of the situation last week, the RBI’s regulatory crackdown may also be a prelude to Paytm’s license being revoked.

Following a Reuters story stating that India’s federal anti-fraud agency was looking into whether platforms operated by the company had violated foreign currency regulations, the stock saw a record low early on Tuesday.

A Paytm representative referred to the accusations as “unfounded and factually incorrect” and denied any infractions of foreign currency law.

Later, the company’s shares recovered from their losses, increasing as much as 8% for the day and closing at a 6 percent increase at Rs. 465.

Given the volume of bad news that is still hanging over the company, Profitmart Securities head of research Avinash Gorakshakar suggested that the latest share increase could be a “dead-cat bounce” following the recent selloff.

Although Bernstein cut its target share price from Rs. 950 to Rs. 600, it kept its outperform rating.

“While the regulatory action will no doubt have a lasting impact on investors’ assessment of the business model risk and of the management’s ability to handle regulatory risk, we expect the company to successfully execute the operational changes required to overcome the restrictions,” analysts at Bernstein stated.