VSS, senior Paytm officials meet RBI, regulators not keen on saving wallets business

Vijay Shekhar Sharma, founder of Paytm

Vijay Shekhar Sharma led a group of executives from the embattled mobile payments firm Paytm he had founded to meet Reserve Bank of India officials first on February 5 to discuss the modalities of account migration for the Paytm Payments Bank (PPBL) customers, a couple of sources familiar with the development told Moneycontrol.

The two sides are likely to meet again on February 6, the sources said. According to them, the regulator is not keen on salvaging the company's wallet business through migration or transfer of assets. One of the sources said that the discussions mostly centred on stabilising and transitioning the UPI accounts and handles managed by PPBL and that the wallet migration is not the focus of discussion as of now.

News agency Reuters had first reported that Sharma met RBI officials on Monday.

On February 6, officials from the National Payments Council of India (NPCI), which is the national digital payments watchdog, and a few senior bankers too are likely to join the meeting, which is being held under the aegis of the central bank.

Moneycontrol had reported on February 5 that most top banks that work actively with fintechs were not keen to take up the project without the blessings of the RBI as they see KYC issues coming to haunt them even if they take up the business. Among other issues being discussed at the meeting is whether the RBI could extend the deadline by a couple of weeks since this is likely to be an onerous task.

According to one of the sources, the regulators are not keen on any banking institution acquiring the wallet business or the possibility of those being migrated to any other banks as of now. The source said that the regulators believe that wallets will not be a big disruption as it is a minuscule part of India's digital payment ecosystem.

Some discussions have also taken place on migrating the nodal accounts. A nodal account is like an interim escrow account where the collections are pooled before sending to merchants. Money has to be held by a bank and this nodal account can likely be migrated to a scheduled commercial bank.

There are also concerns about bill payments through Paytm as PPBL operates a Bharat Bill Pay Operating Unit (BBPOU), an operating licence that helps bill payment apps connect with all the billers in the country managed through the Bharat Bill Payment System (BBPS), owned by the NPCI. Around 15 percent of all utility bill payments through BBPS take place through Paytm.

The discussions with BBPS and the RBI are still on and the idea is that the Paytm app will act as an agent and will partner with another bank or organisation with a BBPOU licence.

"Our priority is to make sure that there is no disruption in the UPI payments as a lot of merchants use Paytm and the PPBL as their settlement accounts. We need to make sure that all the QR codes on the soundbox have to be remapped at the backend once the VPA (virtual payment address) changes from @paytm to 0ther banks," one of the sources said.

Since these QR codes are not stickers but configured at the time of manufacturing at the soundbox factory, reconfiguration at the backend is expected to take time and can be done only after migrating the accounts. The regulators are keen to ensure that a few top banks take up the migration and switch so that UPI payments at merchants continue to go through without inconveniencing either the merchants or the customers.

Paytm Payments Bank is the largest beneficiary bank in the UPI ecosystem and the immediate concern of the regulators is to make sure that no disruption happens and the banks are on board to do the speedy migration. This is also likely to put stress on the banks that are going to handle another three billion transactions. So the regulators are trying to ensure that more than two major banks are part of the initiative to move the UPI assets.