Paytm to resume lending platform provider operations from first week of March, say sources

Paytm

One97 Communication Ltd, which owns the Paytm brand, is likely to resume lending platform provider operations for digital loans by its partner banks and non-banking financial companies (NBFCs) in the first week of March, people aware of the development told Moneycontrol on February 26.

“Initially we had planned to resume operations on March 1, but some discussions are still going on, so it will start in the first week of March,” a person aware of the matter said, on condition of anonymity.

Paytm's lending platform provider business is not linked to Paytm Payments Bank Limited’s (PPBL) operations.

Paytm provides a platform for NBFCs and banks to provide personal loans and issue credit cards, respectively, to their customers. As per the Paytm application, these companies and banks are Shriram Finance, Aditya Birla Capital, Poonawalla Fincorp, HDFC Bank, and SBI Cards, among others.

Email sent to Paytm remained unanswered till the time of publishing this story.

On February 1, Paytm paused its lending platform operations for a couple of weeks as lending partners on the platform requested clarity on the Reserve Bank of India (RBI) notification of strictures.

A day earlier, the RBI had imposed business restrictions on PPBL, including a ban on accepting fresh deposits and undertaking credit transactions after February 29. On February 16, it extended the deadline to March 15.

Also read: After Axis Bank, HDFC and Yes Bank submit TPAP application for Paytm UPI business

Management comments on lending

In an investor conference call on February 1, the company management said that its lending partners on the platform had requested clarity on the RBI notification, adding that the company was in talks with them to address their concerns. Paytm has 11 banking and non-banking financial companies that lend to Paytm customers through their platform.

"Each lender will have concerns and we are engaging with them. We are clarifying what kind of an impact this will have on the portfolio. They had questions and are processing our answers. We have been proactively working with them. We have paused new origination of loans for a couple of weeks and there has been a disruption," COO Bhavesh Gupta said.

The pause in operations is also because around 60,000 merchants who have taken loans use PPBL as the settlement account. The repayment is based on auto payment done on the eNACH platform and now this repayment account will have to be moved to other bank accounts and then the autopay mandate has to be set on that account as well. While these can be done digitally, Paytm will have to talk to merchants to do this operational exercise.

The RBI action

On January 31, the RBI imposed business restrictions on PPBL. The central bank said a comprehensive system audit and compliance validation report of external auditors had revealed persistent non-compliance and material supervisory concerns in the bank.

The RBI barred PPBL from accepting further deposits and top-ups, or doing credit transactions in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc., after February 29. PPBL can only pay interest, cashbacks or refunds, the RBI said.

On March 11, 2022, the RBI had barred PPBL from taking on new customers, saying that it had violated know-your-customer (KYC) norms.

Also read: RBI says ‘@paytm’ handles to migrate seamlessly from PPBL to other banks

Some banks eye share in QR code business

Some banks such as Bank of India (BoI) and YES Bank are eyeing a share in the QR codes and Soundbox business. Recently, FAQs released by the central bank on the PPBL issue had clarified that in order to continue receiving payments, merchants need to obtain fresh QR codes linked to an account with a different bank or wallet before March 15.

Moneycontrol on February 23 quoted a senior BoI official saying that the lender has told all branches to work on greater penetration of its QR codes after the Paytm crisis.

Similarly, YES bank has started promoting its UPI application and QR codes after the PPBL crisis.