Negotiations on at acquiring Paytm Payments Bank businesses as RBI deadline looms

New Delhi, Feb 21:  As Paytm Payments Bank announced to shift its nodal account to Axis Bank by opening an escrow account, speculations started on which bank or financial services major is vying to get what businesses at the Paytm subsidiary as the Reserve Bank of India's (RBI) March 15 deadline looms.

Negotiations with Paytm are reportedly underway for a chunk of FASTags, National Common Mobility Card and becoming banking partners for UPI transactions-related businesses but deals are yet to be finalised.

However, "the basic risk in this opportunity would be the KYC of merchants or client onboarding. If banks take any business, they'll have to re-do KYC because nobody wants to get on the wrong side of the regulator", according to Kuntal Sur, partner–risk consulting and leader for financial services and treasury risk management at PwC India.

Paytm is looking to have three banks as a banking partner for smooth UPI services, according to sources.

Yes Bank, Axis Bank, and HDFC Bank are the possible top picks for the fintech major.

The conversations with Yes Bank "have completed four rounds, and a final decision is expected before March", said people aware of the matter.

For Paytm’s FASTag business, most banks are looking at becoming acquirers, according to people aware of the matter.

The National Highways Authority of India (NHAI) dropped Paytm Payments Bank from the list of authorised banks for FASTag services due to the RBI action.

There is also room to acquire the National Common Mobility Card business. For this, negotiations are reportedly at an advanced stage with the State Bank of India, but a consensus is yet to be reached.

As banks continue their discussions with Paytm, non-bank lenders who had partnerships with Paytm are adopting a wait-and-watch approach, said sources.

According to them, Shriram Finance is awaiting clarity from Paytm on when the lending business will resume. The company may reach out to Axis Bank soon to get some clarity on the situation. Paytm has over 30 crore users, with around 11 crore monthly transacting users. It also has a network of around 1 crore merchants actively accepting payments.

The company has reassured its users that its mobile app, including the QR code, Soundbox and Card Machine will remain operational even after March 15.

Meanwhile, Union Finance Minister Nirmala Sitharaman is expected to meet fintech startups next week amid regulatory concerns, after the central bank acted on Paytm Payments Bank. The aim of the meeting is to "address the importance of regulatory compliance to these entities".