Paytm announced on Thursday its decision to discontinue its association with Paytm Payments Bank and expedite efforts to collaborate with other banks. This move comes in response to the Reserve Bank of India’s (RBI) recent directive, which imposed severe restrictions on Paytm Payments Bank, effectively halting most of its banking operations due to regulatory concerns.
Paytm has announced its decision to sever ties with Paytm Payments Bank and pursue collaborations with alternative banks following the RBI’s imposition of stringent restrictions on the payment bank’s operations.
Impact on Business Operations
The Noida-based financial services company stated that its loan distribution, insurance distribution, and equity broking activities will remain unaffected by the RBI’s directive, as these operations are independent of Paytm Payments Bank. The payment bank currently serves 330 million wallet accounts and 30 million bank accounts.
The RBI’s stringent measures prohibit Paytm Payments Bank from offering various banking services, including accepting new deposits and facilitating credit transactions. Additionally, the central bank mandated the termination of nodal accounts associated with Paytm and Paytm Payments Bank. As a result, Paytm intends to transition its nodal accounts to other banks.
Despite these developments, Paytm assured that its Payment Gateway business for online merchants will continue to provide payment solutions to existing merchants. Furthermore, its offline merchant payment network offerings, such as Paytm QR, Paytm Soundbox, and Paytm Card Machine, will operate as usual, allowing for the onboarding of new offline merchants.
Financial Impact and Future Plans
Paytm anticipates a potential annual EBITDA reduction of $36 million to $60 million in a worst-case scenario. Moving forward, the company plans to expand its payments and financial services exclusively through partnerships with other banks.
Industry analysts and executives have expressed concerns regarding Paytm’s ability to secure partnerships with other banks following the RBI’s actions. Some have projected a significant negative revenue impact on Paytm, emphasizing the challenges the company may face in the aftermath of the regulatory intervention.