Shares in India’s Paytm plunged 20 per cent for a second straight day after its banking arm was ordered to halt business and despite assurances from its CEO that the firm’s digital payments app would continue to function normally.

The rout has erased about $2 billion in market value for Paytm - a company that has a long history of being in hot water - as it faces its biggest business and reputational crisis to date.

The Reserve Bank of India (RBI) said the action was taken due to Paytm Payments Bank’s non-compliance with rules and supervisory concerns, which a source with knowledge of the matter said had stretched over years.

Paytm’s banking unit powers most features of India’s most popular digital payments app that competes with the likes of Walmart’s PhonePe and Google. The app is used by millions of users to transfer funds, pay bills and maintain a digital wallet for retail payments.

Come March 1, the RBI has said, the bank will be prohibited from further deposits, credit transactions or wallet uploads. No fund transfers will be allowed either, which means that unless Paytm finds a new banking partner or partners, it will not be able to offer most services on its app.

CEO Vijay Shekhar Sharma has said partnerships with banks would “not be difficult to execute”, and on Friday he sought to reassure app users again.

“Your favourite app is working, will keep working beyond 29 February as usual,” he said in a post on X.