Since the Reserve Bank of India (RBI) barred Paytm Payments Bank Ltd (PPBL) from accepting any more deposits from February 29 due to “persistent non-compliance”, the shares of One97 Communications Ltd have fallen over 43%. They are trading near an all-time low of Rs 438.35 per share. The order meant that PPBL could not undertake any banking activity, including accepting deposits, credit transactions, wallet top-ups, and bill payments. Later, on February 2, a report by Bloomberg stated that the RBI is also considering cancelling Paytm Payments Bank’s operating license as early as next month once the depositors are safeguarded.

Paytm Payments Bank Ltd offers digital banking services, including savings accounts, current accounts, fixed deposits with partner banks, and balance in wallets, UPI, and FASTag, among other services. According to the rules of payment banks, they cannot lend any money and can accept deposits only up to Rs 2, 00,000. Paytm Wallet also comes under the ambit of PPBL.

According to RBI’s provisional data for December 2023, Paytm Wallet users carried out 247.2 million transactions worth over Rs 8,000 crore for the purchase of goods and services, while 20.7 million transactions were carried out for transferring over Rs 5,900 crore.

Customers will not be able to deposit or top-up their customer accounts, wallets, FASTags, and other instruments after February 29. However, withdrawal or utilisation of balances by its customers from their accounts, including savings bank accounts, current accounts, prepaid instruments, FASTags, and National Common Mobility Cards, are permitted without any restrictions up to their available balance.

Paytm said it is being discussed with the RBI to comply with their directions. Moreover, it said that its financial services, such as loan distribution, insurance distribution, and equity broking, are unrelated to PPBL’s banking activities.

Nodal Accounts with Axis Bank and Yes Bank

Paytm is in talks with Yes Bank to establish a nodal account for its parent company, 197 Communications, and payment services. This will ensure merchant settlement payments continue after Paytm Payments Bank ceases banking activities on March 15. 

Paytm’s nodal account with Paytm Payments Bank, where merchant transactions were settled, was terminated by RBI. Paytm partnered with Axis Bank for a nodal SQR account for OCL and payment services. The Yes Bank nodal account will enable high UPI transaction volumes between banks. 

For banks involved, two benefits include earning fees for merchant settlements and access to temporary surplus funds for deployment in the money market. Paytm applied for T-PAP status with NPCI and received consent from Axis Bank and Yes Bank to act as payment service providers for the UPI channel. They are also in talks with the State Bank of India and HDFC Bank.

Additionally, Paytm has applied for third-party application provider (T-PAP) status with NPCI and has received consent from both Axis Bank and Yes Bank to act as payment service providers for the UPI channel. Besides these two banks, Paytm is also in talks with the State Bank of India and HDFC Bank to become payment service providers. RBI recently directed NPCI to facilitate four or five other banks as payment service providers to ensure seamless migration of the Paytm handle when making UPI transactions on the app