Paytm's Parent Company, One97 Communication, Decides to Part Ways with Paytm Payments Bank Amidst Regulatory Challenges

In response to recent actions by the Reserve Bank of India (RBI) against Paytm Payments Bank (PPBL), One97 Communication (OCL), the parent company of the Paytm brand, has announced its decision to disassociate from PPBL. This move follows a 20% drop in OCL’s shares in the aftermath of the regulatory actions.

Addressing analysts, Vijay Shekhar Sharma, Paytm founder and OCL CEO, referred to the development as a “speed bump” and expressed confidence that the company would overcome the crisis. However, he acknowledged that OCL would need to halt loan distribution for two weeks and navigate the transition of merchant QR code accounts from PPBL to other banks.

RBI’s recent directive barred PPBL from adding funds to customer accounts, rendering most of its services ineffective starting March 1. Sharma emphasized that OCL had distanced itself from PPBL over the last two years, citing a significant gap in data sharing.

Bhavesh Gupta, President and COO, outlined the challenges of migrating merchant QR codes and sound boxes linked to PPBL accounts to other banks. The company is exploring options for a one-time migration, engaging in discussions with multiple banks and regulators. Gupta mentioned the app’s intention to sell Fastags from other banks.

With OCL stock experiencing a significant decline, the company estimated a worst-case impact of Rs 300-500 crore on its EBITDA due to RBI’s measures. Gupta stated that efforts are underway to move settlement accounts for merchants with loans from PPBL to other banks. Despite challenges, OCL assured compliance with RBI directives and emphasized ongoing collaboration with the banking regulator. Startup investors predict that competitors will seize the opportunity to expand their market share in light of these developments.