Paytm Payments Bank crisis, how it is affecting users

Paytm Payments Bank crisis, how it is affecting users.

 

Fintech startup Paytm Payments Bank has been ordered to stop operations after RBI issued a notice directing it to take deposits but not lend. The RBI has also asked the bank to stop top-ups of accounts, wallets, and other financial instruments after February 29. The bank's top-up function will also stop and transactions through it will no longer be allowed. In a significant move, India's central bank, the Reserve Bank of India (RBI), has imposed restrictions on fintech giant Paytm, prohibiting it from providing any forms of banking services to its customers. The RBI cited "non-compliance and ongoing material supervisory concerns" at One 97 Communications, the parent company of Paytm, as the reasons behind this decision.

 

This new restriction imposed by the RBI could result in the disruption of several services offered by the Paytm platform. It is important to note the services that will remain functional and those that will be affected by this decision:

 

Paytm’s wallet business could perhaps be the first victim of the Reserve Bank of India’s strict ban on the Paytm Payments Bank imposed on January 31, 2024. Housed under Paytm Payments Bank, highly placed sources say the company is in exploratory talks with a few interested investors to sell the wallets business. HDFC Bank and Jio Financial Services are said to be among the forerunners to acquire the same.According to seven senior fintech and banking sector senior executives with knowledge of the matter, Paytm has been in deal talks with Jio Financial Services since November last year. “With KYC related issues compounding for Paytm, they’ve not been as aggressive with the business as they were prior to 2022 in the wallets business and if valuations on the table were decent, the talks would with Jio would have fructified much earlier,” said one of the bankers.

But now with the business facing the threat of coming to a screeching halt, the intent of selling the business is more to ensure continuity for Paytm’s existing wallet users. “You could call it a distress sale. In such a situation, valuation is the last thing that Paytm can hold on to,” said a fintech expert who didn’t want to be named.

Bailout plan in sight?

As for Jio, it has barely made a dent in the payments bank space and acquiring Paytm’s wallet could give it the much-needed head start. In fact, sources add that as part of a larger bailout plan, Jio could also make an offer to acquire Paytm Payments Bank. “With the risk of the payments bank license getting revoked, this could be a win-win for Jio Payments Bank, Paytm and the larger payments ecosystem as well,” said the banker quoted aboveBailout plan in sight?

As for Jio, it has barely made a dent in the payments bank space and acquiring Paytm’s wallet could give it the much-needed head start. In fact, sources add that as part of a larger bailout plan, Jio could also make an offer to acquire Paytm Payments Bank. “With the risk of the payments bank license getting revoked, this could be a win-win for Jio Payments Bank, Paytm and the larger payments ecosystem as well,” said the banker quoted above..

Comments

You must be logged in to post a comment.