1. Curious case of Paytm wallets transfer to Paytm Payments Bank; some critical questions need answers

Curious case of Paytm wallets transfer to Paytm Payments Bank; some critical questions need answers

Paytm’s wallet business will soon move to a new company - Paytm Payments Bank Ltd. The company’s blog mentions that the move is an outcome of the directions it has received from the Reserve Bank of India.

By: | Updated: January 10, 2017 7:03 PM
The ownership structure of the new payments bank also raises some very interesting questions. These questions become relevant at a time when Paytm is keen to position itself as an Indian company. The ownership structure of the new payments bank also raises some very interesting questions. These questions become relevant at a time when Paytm is keen to position itself as an Indian company.

Paytm’s wallet is moving to a  new company – Paytm Payments Bank Ltd. The company’s blog says that the move is an outcome of directions received from the Reserve Bank of India. It has sought to allay apprehensions by publishing FAQs on the wallet business move and what the shift will mean for customers. However, the blog and the company are silent on critical aspects that concern customers. The ownership pattern of the new payments bank also raises a lot of very interesting questions. All this comes at a time when the mobile wallet company is witnessing a huge surge in use and customers because of Modi government’s post demonetisation cashless push.

In a blog posted on December 6, Paytm informed its customers that it will be moving its wallets business to a payments bank. The blog mentioned that it is doing this as per ‘directions’ given by the central bank. Most of the blog is devoted to FAQs around the transfer of the wallets business –essentially, all wallets will move seamlessly to the new payments bank, unless customers decide to opt out. Customers will have the option of opening an account with the payments bank and of moving their money to this account or any other bank account. The blog mentions that money will be moved free of charge to the payments bank account. Curiously, it is silent on whether any charges will be applicable on moving the money to a bank account other than the Paytm Payments Bank account.

The ownership structure of the new payments bank also raises some very interesting questions. These questions become relevant at a time when Paytm is keen to position itself as an Indian company; many critics have sought to draw attention to its ‘Chinese ownership’. While the ownership structure is perfectly in compliance with FDI rules relating to payments banks, it is just the positioning as an Indian company that is being questioned. Significantly, it is unclear why dominant foreign stakeholders of One97 Communications, the company that currently runs the wallet business, are now okay with a diminished role in the wallet business and new payments bank.

Watch: Vir Sanghvi in conversation with Paytm founder Vijay Shekhar Sharma over demonetisation

These are important questions that must be answered by the company in the interest of transparency and for the benefit of millions of its customers. Paytm is rapidly emerging as the face of the less-cash drive in India; it will only strengthen people’s faith in the new economic system if a company as dynamic as Paytm is forthright about critical questions posed to it. We, at FE Online, had sent a number of questions to Paytm founder Vijay Shekhar Sharma and to Alibaba & SAIF partners – the significant foreign shareholders in One97 Communications who collectively hold almost 70% of the business that currently owns the Paytm wallet business.

Here are the questions that Paytm, Alibaba and SAIF Partners must answer in the interest of complete transparency:

1) Why is Paytm wallets shifting from One97 Communications to Paytm Payments Bank Ltd? The Paytm blog says it is as per RBI directions. What are these directions and why were these issued to Paytm? Do these directions apply to other mobile wallets like Mobikwik, Freecharge and others as well? Is this move to payments bank mandatory?

2) Is it accurate to position Paytm Payments Bank as an Indian company when it is not 100% Indian? One97 Communications is 70% owned by Alibaba, Ant Financials and SAIF (Hong Kong based venture capital firm). 49% stake of One 97 in Payments Bank, makes Alibaba, Ant financial and SAIF around 35% owners of Paytm Payments Bank.

3) The Paytm wallet business is the biggest business of One97 Communications. Today, Alibaba owns 40% of this business. In the new scheme of things, Alibaba will own around 20% in the payments bank. It will be interesting to know why Alibaba agreed to a move in which their ownership will be reduced to half in the new company. Similarly, for SAIF Partners. Why have they agreed to own half of what they own now in wallet business?

4) Who will finally own the Paytm brand name? One97 Communications or Paytm Payments Bank?

5) Transferring money from Paytm wallet to any bank account has zero charge as of now. In the proposed scheme of things, when Paytm wallet moves to Paytm Payments Bank, it is not clear if the charge will be “zero” for all banks. It will be zero, if you open an account with Paytm Payments Bank and transfer Paytm wallet money to your Paytm Payment Bank account. In case the money from Paytm wallet needs to move to other banks, like HDFC, ICICI, IDBI – it is not clear.

6) The opt-out (not moving wallet from One97 to Paytm Payment bank) option has not been communicated to each user via SMS and email as of now. It has been communicated through a public notice. Why haven’t individual notifications been sent so far?

7) A Medianama article: (http://www.medianama.com/2015/08/223-payments-banks-vijay-shekhar-sharma-airtel-ril-vodafone-fino-among-11-to-get-rbi-approval/), claims the following – “Vijay Shekhar Sharma informs us that it is Paytm that has received the license (for Payments Bank), and not Sharma, in his individual capacity.” However, Vijay Shekhar Sharma now says that it is in his name, an Indian citizen. Is the stake in individual capacity or not?

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  1. D
    Dec 27, 2016 at 3:04 pm
    Check the percentage of foreign investments in "Indian" private banks like HDFC, ICICI & Axis, Paytm as a payment bank is not an aberration in this case.
    1. Mallikarjuna Sharma
      Dec 25, 2016 at 12:20 pm
      This person seems talking truth of his life and out of his heart. But I cannot support his exuberant support to the mad Tuglaqian measure of Modi's demonetization. As for his newly coming up Bank - well, if he can fetch relief to depositors and don't use their deposits to support and promote corporate crooks, then it will be great. Let us see. I have always a grouse. Even if I have a very small business or enterprise - Let me say Sharma Infos - within income tax limits even and even if it is loss making, I am not allowed by these banks to open a savings bank account. But I have to open a current account or take a devious way of some registered society to qualify for SB account or be some company public or under public (government) control. Why so? Will payTM bank change that and say even for small businesses (and in the name of businesses) we will allow SB A/cs up to, say some 10 lakhs or 20 lakhs deposits, and some 100 or so cheque transactions a month, and also pay them usual SB A/c interest instead of insisting on opening current account and not paying any interest to such small businessmen or entrepreneurs but changing some low or heavy bank charges for various services, etc.? However, all said and done cash transactions should be there till the Day End unless the users/customers themselves gradually opt out of it. Otherwise all efforts of coercion or constraint to push rudely for a so-called cashless society will lead to nowhere but totalitarianism. Also as early as possible Internet has to be freed from the clutches of Washington and big corporations and truly internationalized and democratized under an international, impartial authority to be created by the United Nations with the democratic consent and partition of various countries of the world. Otherwise anyday all our ets can be stolen or frozen and we can be cheated and people can be looted by the imperialist and profiteering monsters of the day - be those be of any country at the time.
      1. Anand Ch
        Dec 20, 2016 at 1:58 am
        All these will be por till cash availability and the transaction is free. Once they start charging most birds will fly away. Cash is always easy and cheap.
        1. Shashikant Chaudhari
          Dec 20, 2016 at 3:51 pm
          i think when majority share holding adding 51% of total paid up capital,,,is to be called Indian.Even we Indians purchase companies abroad like Tata Jaguar.will it be the same question will be pertinent.?

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