Banking Giants Eye Paytm Retailer Acquisition

12 Mar 2024 , 02:38 PM

Several reports claim that Axis Bank, Canara Bank, Yes Bank, and Kotak Mahindra Bank are among the front-runners to acquire the merchants brought on board by the troubled Paytm Payments Bank Ltd (PPBL).

One97 Communications Limited (OCL) operates the mobile payments company Paytm, which is used by almost 3 crore merchants. It’s unclear which of these four banks—if any—will acquire the retailers.

Even after the limits take effect on March 15, the Reserve Bank of India (RBI), which placed punitive restrictions on PPBL, has permitted OCL merchants and users of the Unified Payments Interface (UPI) to keep using their handles, QR codes, and point-of-sale (PoS) machines. The regulator took this action to prevent any disruptions to consumer and merchant payments.

The banks anticipate spending between ₹50 and ₹70 crore a year to manage and handle the billions of transactions. The anticipated cost will change based on the banks that onboard certain merchant types, how many transactions will be for less than ₹2,000, and other factors.

“The documentation process is under progress. A senior executive with knowledge of the conversations told Moneycontrol, “Many discussions are taking place, and each of them is at a different stage. Whoever closes the deal will move forward with integration, and it could happen this week.”

Prashant Kumar, the managing director and chief executive officer of Yes Bank, stated two weeks prior that the private lender is amenable to taking over the merchants that PPBL has bought. He continued by saying that as it is in the bank’s best interests to do so, the bank will need to finish the KYC (Know Your Customer) compliance verification and due diligence.

As a third-party application provider (TPAP), Axis, Yes, and HDFC Bank have teamed up with OCL to manage Paytm’s consumer-side UPI business. Up until now, the Paytm app was more akin to the PPBL banking app for UPI.

More than 3 crore merchants use Paytm, according to BSE filings. Of these, about 20 percent, or 60 lakh merchants, utilise PPBL as their settlement savings account, which will remain inactive save for balance withdrawals and transfers to other bank accounts.

In order to acquire the remaining merchants, OCL used PPBL and gave them @Paytm QR codes and handles. Other commercial bank accounts are being used as settlement accounts by these merchants.

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