Explaining the trend of routing money to bank accounts through Paytm via use of credit cards, the company gave its own reasons to for the new measures that become effective from Wednesday.

Online recharge platform Paytm on Wednesday withdrew its zero percent transfer to bank fee facility as it had witnessed a rising misuse of the medium originally meant for the service of its customers and levied a two percent fee charges on adding money to wallet using credit cards.

"To avoid this misuse, we are making some changes in our terms. There will be no fee when you shop on Paytm or pay for any utilities using your credit card or any other payment option but to avoid the misuse highlighted above, we will put two percent fee (inclusive of taxes) only on adding money to wallet using credit cards while adding money using any other payment option remains free," Paytm wrote in its official blog announcing the decision which was shared by Vijay Shekhar Sharma, the founder and CEO of the company.

However, the company gave some respite as well as it simultaneously announced that "this two percent fee charges on credit card would be reversed in the form of a discount coupon for same amount which will be issued within 24 hours of adding money effectively giving you this fee back." The two percent discount coupon will be sent within 24 hours of adding money using credit card, the company said.

Explaining the trend of routing money to bank accounts through Paytm via use of credit cards, the company gave its own reasons to for the new measures that become effective from Wednesday.

"This zero percent transfer to bank fee left an opportunity to misuse this great service meant for our valuable customers. We saw a disturbing trend when many users started funding their Paytm wallet with their credit cards and transferring it to the bank all for free. They were not only getting free loyalty points which effectively is free cash but also getting access to free credit," Paytm wrote in its official blog.

The company in its blog made it clear that the firm has to pay a big amount when such transactions happen and also don't give scope for Paytm to earn through such transactions.

"...Paytm pays fee to card networks or banks whenever you use any payment instrument like any other online commerce company. Paytm pays a hefty charges when you use your credit card to card networks and issuing banks. If user simply adds money and takes to bank, we lose money. Our revenue model requires users to spend money within our network and we make money from the margins available to us on various products/services we offer," the blog said. "We understand many of us use credit cards for consolidating all our monthly payments and using it to get a credit period for buying a product/service but this disturbing trend of using credit cards to rotate cash affects our ability to serve our valuable customers."

The company went on to blame "many employees of national financial institutions" for using this model to rotate cash exploited this model to rotate money at Paytm’s cost.