Customers and rivals are redrawing their plans with the fintech group as Paytm Payments Bank looks towards the abyss. This is due to the expectation that the regulator will need to step in to untangle the knot, as banks vying for the accounts want the RBI to indemnify them on the KYC and money laundering issues, according to people familiar with the matter.
They said that One 97 Communications, the company's parent, will also be impacted. One 97 Communications sources loans for seven non-banking financial companies.
One such relationship is with Umesh Revankar, vice chairman of Shriram Finance, whose company announced that it will review the July 2023 partnership. In the few months that this platform has been with us, only ₹24 crore worth of business has been completed. We'll keep providing those clients with our services. However, we will be reviewing our relationship with Paytm in light of the latest events, Revankar confirmed.
With effect from February 29, the Reserve Bank of India (RBI) issued an order on January 31 to Paytm Payments Bank to cease all basic payment services via a variety of platforms and technology railroads, including the Unified Payments Interface (UPI), IMPS, Aadhaar-enabled payments, and bill payment transactions.
"No bank would want to take any responsibility for Paytm's past KYC and other issues and will seek an indemnity from the RBI against any past transgressions coming up in the future. Ultimately we will need comfort and blessings of the RBI," said a banker who did not want to be identified.
The structure and the interconnected nature of the business complicates the unwinding. While the payments bank needs the RBI approval, its connected e-commerce and lending app businesses don't. But those businesses could also have linkages with banks in the next few weeks.
