PPBL receives RBI directions; Paytm to expand its existing relationships with leading third-party banks to distribute payments and financial services products

Last Updated: February 2, 2024

We would like to update that we have been informed by our associate, Paytm Payments Bank Limited (PPBL), that the Reserve Bank of India (RBI) vide its Press Release dated January 31, 2024, has given it further directions under section 35A of the Banking Regulation Act, 1949. PPBL is taking immediate steps to comply with the RBI directions, including working with the regulator to address their concerns as quickly as possible.

Paytm Payments Bank Limited (PPBL), an associate of OCL (One 97 Communications Limited), received RBI directions on 31st January 2024. We are expanding our existing relationships with leading third-party banks to distribute payments and financial services products.

The Bank is taking immediate steps to comply with RBI directions, including working with the regulator to address their concerns as quickly as possible. We have been informed that this does not impact user deposits in their savings accounts, Wallets, FASTags, and NCMC accounts, where they can continue to use the existing balances.

We, as a payments company, work with various banks (not just Paytm Payments Bank), on various payments products. We have been working with other banks since the beginning of the embargo. We now will accelerate the plans and completely move to other bank partners.

Going forward, we will be working only with other banks, and not with the PPBL. The next phase of our journey is to continue to expand our payments and financial services business, only in partnerships with other banks. We offer acquiring services to merchants in partnership with several leading banks in the country and will continue to expand third-party bank partnerships.

Our Payment Gateway business (online merchants) will continue to offer payment solutions to our existing merchants. Our offline merchant payment network offerings like Paytm QR, Paytm Soundbox, Paytm Card Machine, will continue as usual, where it can onboard new offline merchants as well.

Concerning the direction on termination of the nodal account of OCL and Paytm Payments Services Limited (PPSL) by February 29, 2024, we, along with PPSL, will move the nodal to other banks during this period. We will pursue partnerships with various other banks, to offer various payment products to our customers.

Our other financial services such as loan distribution, insurance distribution, and equity broking, are not in any way related to our associate bank and are expected to be unaffected by this direction.

Depending on the nature of the resolution, we expect this action to have a worst-case impact of Rs 300 to 500 crore on our annual EBITDA going forward. However, we expect to continue on our trajectory to improve our profitability. Separately, in response to market rumors, our founder has reconfirmed to us that he has not taken any margin loans, or otherwise pledged any shares that are directly or indirectly owned by him.

We would take this opportunity to clarify that as per banking regulations, the Bank is run independently by its management and board. While we are allowed to have two board seats on the board of the Bank, as a part of their shareholder agreement, we exert no influence on the operations of the Bank, other than as a minority board member, and minority shareholder.