Paytm to move nodal accounts, QR codes to other banks

 Paytm to move nodal accounts, QR codes to other banks

To stop dependency on PPBL; share plunges 20%

Stung by the Reserve Bank decision to terminate the nodal accounts of Paytm after February 29, One97 Communications Ltd (OCL) – which owns Paytm — on Thursday indicated that the company will stop its dependency on Paytm Payments Bank Ltd (PPBL) and its nodal accounts and QR codes will be moved to other banks.

Paytm shares fell 20 per cent to Rs 608.80 on Thursday amid worries that the RBI action will disrupt the services of the company.

OCL and PPSL are already in the process of moving nodal accounts to other banks, and marketing business services are not affected due to these directions, OCL Chairman and CEO Vijay Shekhar Sharma said in a conference call.

“OCL already works various with other banks and Paytm Payments Bank was one of the key banks. From here on we are clear we will work with various other banks and not PPB,” 

,” says Founder and CEO @vijayshekhar

— Paytm (@Paytm) February 1, 2024

“OCL already works various with other banks and Paytm Payments Bank was one of the key banks. From here on, we are clear we will work with various other banks and not PPBL,” he said.

“In offline versions, where you see our All-in-one QR, powered by Paytm Payments Bank… now that QR will need to be changed to any other sponsored bank. This will be a large exercise, the new acquisition will immediately start in a week or two,” Paytm President and COO Bhavesh Gupta said.

Nodal account is a special purpose account created for receiving money from participating banks and remitting to specific merchants. The nodal account acts as a temporary vault to store and distribute the money to relevant parties.

The RBI had prescribed for nodal account in 2009 in order to safeguard interests of the customers and ensure that payments made by them using electronic modes are duly accounted for. As per RBI mandate, the intermediaries receiving online payments need to collect the money in a nodal account, payments to the seller happens from this account without any delay.

In a big blow to Paytm’s operations, the RBI on Wednesday barred Paytm Payments Bank from accepting deposits or top-ups in any of its key products—customer accounts, prepaid instruments, wallets, FASTags and National Common Mobility Card (NCMC), among others—after February 29 in the wake of “persistent non-compliances and material supervisory concerns”.

“This is an important moment for all of us, we have seen the update from the RBI. The important thing is that we have been given directions and we are taking immediate steps to comply,” Sharma said. Depending on the nature of the resolution, the company expects the RBI action to have a worst-case impact of Rs 300 to 500 crores on its annual EBITDA (earnings before interest, tax, depreciation and amortisation) going forward.

“Two years ago, embargo was placed earlier on on-boarding new customers, we had already started to work with banks, and we will continue to decline & decrease dependency on PPB,” he said.

“On the behalf of Paytm, this is more of a speed bump, but we believe in partnership of the banks and we will be able to see to the same in the next few days,” he said. “There are no details sent to us (Paytm) separately by RBI. The keyword here is that this is a discussion between Paytm Payments Bank and the central bank.”

“With respect to operations, going forward, we will work with large banks and who also provide these services to other consumer companies,” Sharma said.

“We have been working with our various partners. Equity and insurance are unaffected as they do it independently. Lending has no connection with Paytm Payments bank. There are a set of products that the Paytm app offers to users… some products like FASTag which are already distributed by other banks will continue,” Gupta said.

“We will ensure the least amount of disturbance to merchants. We will do whatever is the right approach in this matter,” Gupta said.