Customers, competitors redraw plans with Paytm

As Paytm Payments Bank stares into an abyss, customers and competitors are redrawing their plans with the fintech group, amid expectations that the regulator may have to weigh in to untangle the knot as banks looking to take over the accounts are for the RBI to indemnify them on the KYC and money laundering issues, said people familiar with the matter.
Its parent company, One 97 Communications, which has a loan sourcing business with seven non-banking financial companies, will also be impacted, they said.
Shriram Finance vice chairman Umesh Revankar, whose company has one such relationship, said it will revisit the partnership, which was forged in July 2023. “This platform has been with us for a few months and only ₹24 crore business has been done. We will continue to service those customers. But, yes, in the light of the recent developments, we will be revisiting our relationship with Paytm,” Revankar said.
The Reserve Bank of India (RBI), on January 31, ordered Paytm Payments Bank to stop all basic payment services through various platforms and technology railroads – Unified Payments Interface (UPI), IMPS, Aadhaar-enabled payments and bill payment transactions – with effect from February 29.

“No bank would want to take any responsibility for Paytm’s past KYC and other issues and will seek an indemnity from the RBI against any past transgressions coming up in the future. Ultimately we will need comfort and blessings of the RBI,” said a banker who did not want to be identified.

The structure and the interconnected nature of the business complicates the unwinding. While the payments bank needs the RBI approval, its connected e-commerce and lending app businesses don’t. But those businesses could also have linkages with banks in the next few weeks.Bankers said funds have already started moving away from the payments bank and in the next few days it would be clear as to what is left, and that this too is holding them back from getting into any deal.At least half a dozen banks, including HDFC Bank, Yes Bank and Axis Bank, are engaged in discussions with Paytm Payments Bank’s parent company on how to ensure that millions of the payments bank customers transact without interruptions.

State Bank of India (SBI) is also reaching out to merchants to support payment systems in light of the regulatory action against Paytm Payments Bank, said chairman Dinesh Khara. The nation’s largest lender will be “happy to welcome” merchants and is also open to a one-time migration of accounts from the besieged payments bank, he said.

ET’s queries emailed to HDFC Bank, Axis Bank, Yes Bank and One 97 Communications did not elicit a response till press time.

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