Paytm open to acquisition of payments arm to continue operations

Banking arm changing hands: Paytm Payments Bank is open to all options to maintain operations of its banking arm, after the Reserve Bank of India’s March 15 temporary respite.

This follows earlier reports of Jio Financial Services speculated to take over Paytm’s wallet business, which was denied by both the entities.

The payments arm, which was started in 2017 as a scheduled bank approved from the RBI, the ban will impact close to 300 million wallets and 30 million bank accounts, as claimed on Paytm Payments Bank’s website.

It will also affect  2.5 million FASTag users, 6 crore Paytm wallet users who use it to make daily payments, and 7 lakh of NCMC users who travel with the payments offering.

Paytm is also losing its FASTag status, which will push business to banks and other digital wallets for recharge. In some cases, users may have to buy a new FASTag if it is linked to Paytm after deactivating it. Paytm currently has over 2 million FASTag users.

Trade body CAIT also asked merchants to shift payment base from the Noida-based fintech to other players. Paytm has 6 crore wallet users who make daily payments using the app, as well as 7 lakh users of NCMC for travel and local store payments. 

The survival of Paytm Payments Bank through an acquisition is not off the cards for One97 Communications, the parent company of Paytm as per sources cited in a report.

This would reflect ‘good behaviour’ on part of the bank, and result in the easing of some restrictions since setting up the bank was a painstaking effort, which must continue irrespective of who owns it, as per the source cited.

The sale would, however, be subject to RBI’s approval.

Paytm had called the RBI action a ‘speedbreaker’ during an analyst call after the January 31 directive, which gave it a month to wind down most of its payment operations linked to PPBL.

Even as Bernstein maintained a balanced outlook on the RBI directives, highlighting positives and negatives, Jefferies Financial Group has dropped coverage on operator One97 Communications until developments around the listed fintech “settle down.”

Paytm was restricted to onboard new users on Paytm Payments Bank since 2022, with issues such as video KYC and over a thousand bank accounts liked to a single PAN card.

“Persistent non-compliance” by Paytm led to the RBI action of a clampdown on its operations.