Paytm may have to face hurdles when it comes to forming partnerships for its Paytm Payments Bank (PPB) accounts as banks are unsure about taking them over, senior bankers told FE.
For most banks, it is a question of reputational risk besides being unsure about the quality of accounts. They would rather wait for a green signal from the Reserve Bank of India (RBI) or some other regulatory comfort before going forward.
After the RBI last week barred it from undertaking any banking activities after February 29, One97 Communication, the parent of Paytm, is looking to transfer all its PPB accounts to other banks. The fintech firm is also trying to ensure that while the back-end banker changes, merchants and customers continue to stay with the Paytm app.
There is a catch here because bankers are quite willing to take over the merchant and customer accounts, but they aren’t very comfortable with them transacting over the Paytm app.
On February 3, State Bank of India (SBI) chairman Dinesh Khara said while the lender is reaching out to PPB merchants for onboarding them, going any further than that, like taking a stake in PPB, was not on the table.
“We need to look into balance sheets, governance, etc, before these decisions. Nevertheless, we are quite open in terms of coming to support of the merchant community and would be more than happy to provide them PoS (point of sale) machines, QR codes, so that they face no disruption,” Khara said.
Even other bankers, including some private sector bankers, that FE spoke to were uncertain. There have been questions over the KYC compliance. So, banks face the humungous task of going through the entire paperwork of over 330 million accounts, according to reports, all over again.
In fact, some are even rethinking their existing relationship with the fintech firm, according to industry sources. Sources told FE that at least one large non-banking financial company (NBFC) is waiting for clarity on merchant shift from Paytm platform and stopped offering its loan products through the application.
Many others have said that they are being extra cautious because coming under the RBI’s radar due to compliances issues despite having being banned from taking new customers over 2 years back in March 2022 was quite worrisome.
On January 31, the RBI said that due to persistent non-compliances and continued material supervisory concerns in the bank, Paytm Payments Bank will not be able to accept further deposits, credit transactions or any top-ups shall not be allowed in any customer accounts, prepaid instruments, wallet, FasTags, NCMC cards after February 29. The regulator came down heavily on the payments bank, suspending the nodal accounts of One97 Communications and Paytm Payments Services.
“This RBI diktat means that you are only allowed to run down your balances and not do top-ups. So, the wallet side of business may fall. If you are a consumer, you will not want to be hassled and move to someone else. And you already have an account somewhere so it will not be a big deal,” said a private sector banker.