Paytm Payments Bank to collaborate with third party banks for providing financial services

Paytm Payments Bank Limited (PPBL), associated with OCL (One 97 Communications Limited), is set to expand its collaborations with third-party banks for the distribution of payments and financial services products.
RBI Directions to Paytm Payments Bank Limited
The Reserve Bank of India (RBI) has issued directions to PPBL under section 35A of the Banking Regulation Act, 1949, as per a press release dated January 31, 2024. PPBL is taking immediate steps to comply with these directives and address concerns in cooperation with the regulator.
Impact on User Deposits and Existing Balances
The directive from RBI does not impact user deposits in savings accounts, Wallets, FASTags, and NCMC accounts. Users can continue using their existing balances in these accounts without any changes.
Changes in OCL’s Relationship with Paytm Payments Bank Limited
OCL, as a payments company, has decided to accelerate its plans to work with other bank partners instead of PPBL. OCL will exclusively collaborate with other banks, marking the next phase of its journey in expanding payments and financial services.
Continuation of Paytm Payment Gateway Business
The Paytm Payment Gateway business for online merchants will continue offering payment solutions to existing merchants. Offline merchant payment network offerings, such as Paytm QR and Paytm Card Machine, will also continue as usual, allowing onboarding of new offline merchants.
Transition of Nodal Account to Other Banks
In response to the direction on the termination of nodal accounts of OCL and Paytm Payments Services Limited (PPSL) by February 29, 2024, both entities will move their nodal accounts to other banks during this period.
Pursuit of Partnerships and Impact on Financial Services
OCL will seek partnerships with various banks to offer diverse payment products. Financial services such as loan distribution, insurance distribution, and equity broking, which are unrelated to PPBL, are expected to remain unaffected by the regulatory direction.
Financial Impact and Profitability Expectations
The company anticipates a worst-case impact of Rs. 300 to 500 crores on its annual EBITDA due to these actions. However, it remains committed to improving profitability.
Founder’s Clarification on Market Rumors
Addressing market rumors, Paytm’s founder confirmed that he has not taken any margin loans or pledged any shares directly or indirectly owned by him.
Independence of Paytm Payments Bank Limited
Paytm emphasizes that PPBL operates independently, managed by its own board and management, in accordance with banking regulations. OCL, with two board seats, exerts no influence on PPBL’s operations beyond its role as a minority board member and shareholder.