RBI's Regulatory Concerns: Paytm's stock plummeted by 20% following the Reserve Bank of India's (RBI) concerns over high bad loan rates in the small personal loan segment. The RBI's tightening of rules for riskier loans was a key factor.

Strategic Shift in Lending: In response, Paytm scaled back its loan business, particularly in small, unsecured loans. This was a significant shift from its aggressive expansion into financial services, where it leveraged its large user base from payment services to cross-sell loans.

Impact of Decision: The decision to reduce focus on small loans, a major part of Paytm's lending division, led to investor panic and a sharp stock price decline. This move was seen as Paytm prioritizing prudent lending practices over rapid growth.