Paytm collaborates with Axis Bank to handle merchant payments amid RBI’s actions on payments banks

On Monday morning, shares of One 97 Communications Limited (Paytm) will attract attention as the fintech company revealed a partnership with Axis Bank to facilitate merchant settlements. This move aims to smoothly transition from the nodal account previously used with Paytm Payments Bank. The announcement coincided with the RBI’s release of FAQs, indicating that Paytm QR, card machines, and Soundbox services would remain operational beyond March 15.

Paytm stated that its subsidiary, Paytm Payment Services Ltd (PPSL), has been utilizing Axis Bank’s services since its establishment. Both One 97 Communications Limited (OCL) and PPSL are exploring additional banks for nodal/escrow services. Merchant transaction payments are usually collected in a specific account, facilitating a smooth transition for Paytm’s merchants.

The RBI suggested that merchants could still utilize Paytm QR code/Soundbox or POS terminal if linked to a non-PPBL bank account, which is seen as a positive development. However, more clarity is desired on steps for merchants to continue using these payment solutions, such as potential re-KYC requirements.

 Additionally, details are sought on what actions Paytm must take to enable these payments, like transitioning nodal accounts or partnering with another bank as a PSP. While it’s understood that these matters pertain to One 97 entity and possibly NPCI governance, additional information would have been beneficial, considering the consultation with NPCI and NHAI.

Bernstein expressed the need for clarification regarding certain restrictions, particularly due to the extension of the cut-off date to March 15 from February 29. The foreign brokerage recommended an ‘Outperform’ rating on Paytm with a target price of Rs 600.

“While there was no explicit exception for bulk transfer of wallets/Fastags to another bank, resulting in the discontinuation of these products, which was largely anticipated as a negative, the transfer of balances to another wallet remains permissible,” stated Bernstein.

The foreign brokerage remarked that the Reserve Bank of India’s actions seem focused on Paytm Payments Bank without intending to disrupt UPI payments and other Paytm functions. “This is seen as a positive development, although more detailed information is still desired,” it concluded.

Collaboration with Axis Bank

Paytm Payment Services Ltd (PPSL), a subsidiary of OCL(One97 Communications), has long been using Axis Bank’s services, boosting confidence in the transition.

An Axis Bank official stressed that this established partnership would ensure smooth money flow through the nodal account, underscoring their dedication to seamless financial transactions.

Extension of RBI’s Directive Deadline

Initially, RBI ordered closing of OCL and PPSL’s nodal accounts by Feb 29, citing compliance issues. However, the deadline was extended to March 15 for halting new deposits or credits.

Extension of RBI’s Directive Deadline

The RBI’s FAQ stated that merchants utilizing Paytm’s services can still receive payments via QR codes, soundboxes, or POS terminals post-March 15, as long as their accounts are connected to banks other than Paytm Payments Bank.

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