Yes Bank open to acquiring the merchant accounts of Paytm Payments Bank: CEO Prashant Kumar

“Regulator is very clear, we cannot shift risk from one entity to another. If there have been risks identified in compliance or any other risk within Paytm (and PPBL) because which the regulatory action is taken, then we need to make sure the risk is not migrated to other entities and rather resolved and taken care of,” Kumar added.

To be sure, as per data available on BSE filings, Paytm has more than 3 crore merchants on its platform, of which around 20 percent, or around 60 lahk, use PPBL as their settlement savings account, which will be inoperative other than for withdrawal of the balance amount or transfer it to other bank accounts.

For the rest of the merchants, One97 Communications, which owns the Paytm brand, leveraged PPBL to acquire them while providing them with @ Paytm QR codes and handles. These merchants are using other commercial bank accounts as settlement accounts.

The fintech firm’s total merchant GMV processed through the platform for July and August of last year was around Rs 3 lakh crore ($36.3 billion), marking a YoY growth of 43 percent.

The CEO’s words come at a crucial time as the Reserve Bank of India (RBI) imposed crippling restrictions on PPBL, an associate company of One97, the latter has been forced to seek bank partnerships to sustain its UPI business.

The central bank has directed PPBL to halt all banking services, except for the withdrawal of the remaining funds in the accounts. It is believed that the payment service provider (PSP) services will also be affected.

Also, for most of the UPI addresses on the Paytm app, the sponsor bank – technically called the payment service provider (PSP) bank -- is PPBL. Now these accounts have to be migrated to different banks.

On February 23, RBI asked the National Payments Corporation of India (NPCI) to facilitate the migration of all UPI @paytm handles seamlessly to three or four commercial banks to avoid disrupting the country’s popular digital payments platform.

PPBL acts as a payment service provider (PSP) bank for all Paytm UPI accounts, all of which have @ paytm handles. If those accounts have to function beyond March 15, they need the regulator’s special approval to seamlessly migrate those accounts to other banks and even keep the PSP function running until the assets are transferred to other banks, which could take longer than March 15.

Paytm has partnered with Axis Bank, HDFC Bank and Yes Bank to run its UPI services as a third-party application provider (TPAP) player much like its competitors, Google Pay and PhonePe, Moneycontrol reported.

“The process for TPAP application is underway, it is all in the hands of NPCI now,” Kumar said.

Paytm boasts an estimated 90 million UPI users on its platform. Major UPI apps like PhonePe, Google Pay, Cred, and Amazon Pay are TPAPs, having similar PSP bank partnerships to facilitate UPI transactions.

However, until now Paytm did not require a bank partnership due to PPBL being a bank itself. In fact, for UPI payments, the Paytm app operated more like the mobile banking interface of PPBL.

Once approved by the NPCI, Paytm will also function as a TPAP, similar to its competitors.