The company expects this action to have a worst-case impact of Rs 300-500 crore on its annual EBITDA going forward
New Delhi: In a major action against Paytm Payments Bank (PPBL), the Reserve Bank on Wednesday directed the lender to stop accepting deposits or top-ups in any customer accounts, wallets, FASTTags and other instruments after February 29.
However, any interest, cashback, or refunds may be credited back to customers at any time. The direction follows persistent non-compliance and continued material supervisory concerns, the central bank said in a statement.
On March 11, 2022, the RBI barred PPBL from onboarding new customers with immediate effect. Paytm group firm PPBL did not offer any comments on the RBI’s direction against the bank.
“No further deposits or credit transactions or top-ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashback, or refunds which may be credited anytime,” the RBI said.
Further, 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 to be permitted without any restrictions, up to their available balance.
“No other banking services other than those … like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc), BBPOU and UPI facility should be provided by the bank after February 29, 2024,” it added.
RBI also said the ‘nodal accounts’ of One97 Communications Ltd (OCL) and Paytm Payments Services are to be terminated at the earliest, in any case not later than February 29, 2024.
One97 Communications, which owns the Paytm brand, holds a 49% stake in Paytm Payments Bank Limited but classifies it as an associate of the company and not as a subsidiary.
Settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) should be completed by March 15, 2024, and no further transactions would be permitted thereafter, RBI added,
Earlier, Indian Highways Management Company (IHMCL), the arm of NHAI, had barred Paytm Payments Bank from issuing fresh FASTags after it found that Paytm Payments Bank was not following the parameters prescribed in the service-level agreement.
Impact on Operations
The order will have an impact of Rs 300-500 crore on the annual operational profit of the company.
“Depending on the nature of the resolution, the company expects this action to have a worst-case impact of Rs 300-500 crore on its annual EBITDA going forward. However, the company expects to continue on its trajectory to improve its profitability,” Paytm said in a regulatory filing.
“OCL, as a payments company, works with various banks (not just Paytm Payments Bank), on various payments products. OCL started to work with other banks since starting of the embargo. We now will accelerate the plans and completely move to other bank partners. Going forward, OCL will be working only with other banks, and not with PPBL,” Paytm said.
Paytm said PPBL is taking immediate steps to comply with RBI directions, including working with the regulator to address their concerns as quickly as possible.
“The company has been informed that this does not impact user deposits in their savings accounts, Wallets, FASTags, and NCMC accounts, where they can continue to use the existing balances,” the filing said.
The Paytm Payment Gateway business (online merchants) will continue to offer payment solutions to its existing merchants.
“OCL’s offline merchant payment network offerings like Paytm QR, Paytm Soundbox, Paytm Card Machine, will continue as usual, where it can onboard new offline merchants as well,” the filing said.
“OCL will pursue partnerships with various other banks, to offer various payment products to its customers,” Paytm said.
The company said that its financial services such as loan distribution, insurance distribution and equity broking, are not in any way related to PPBL and are expected to be unaffected by this direction.
