On January 31, the Reserve Bank of India imposed limitations on Paytm Payments Bank, preventing any deposit or credit transactions in customer accounts after February 29. In the December quarter, Paytm Payments Bank witnessed a 56% year-on-year surge in disbursed loans, amounting to Rs 15,535 crore across its three loan distribution categories—merchant loans, personal loans, and postpaid loans.
Throughout Q3 FY24, the value of personal loans experienced a substantial increase of 52%, reaching a total of Rs 4,460 crore. Notably, Paytm Payments Bank restructured its lending portfolio in December, prioritizing merchant loans and high-ticket personal loans after discontinuing the buy-now-pay-later lending segment. This strategic shift was prompted by heightened caution among banks and financial institutions following the Reserve Bank of India’s increased risk weightages on unsecured credit in November.
In response to these regulatory constraints, Paytm Payments Bank declared its intention to halt new loan activities and expedite diversification plans. The company is set to fully transition to collaborating with other bank partners, distancing itself from Paytm Payments Bank Ltd. This strategic realignment has been in progress since March 2022.
As part of this transition, Paytm Payments Bank will engage in collaborations with other banks, entailing alterations to the virtual payment address of QR to include multiple sponsored banks. The company aims to finalize partnerships with one or two large banks for this purpose, as articulated by company officials.
Operated by One97 Communications Ltd., Paytm Payments Bank is dedicated to ensuring that both Paytm and Paytm Payments Bank customers have viable alternatives. In anticipation of potential reductions in wallet volumes, the company plans to allocate resources to promote products to merchants. Paytm foresees an annual operational profit decline of Rs 300–500 crore due to these restrictions.
Despite the challenges, Paytm’s CEO, Vijay Shekhar Gupta, anticipates the restoration of “full normalcy” to Paytm’s operations by early March or sooner. The RBI’s restrictions also encompass the termination of nodal accounts at One97 Communications and Paytm Payments Services, scheduled to conclude no later than February 29. Paytm is actively evaluating proposals from multiple banks to relocate these nodal accounts, expressing a commitment to completing the transition before the end of the month.