With less than three weeks left for Paytm Payments Bank to cease its operations, it’s parent company, One97 Communications Ltd, is reported to have made very little progress in ensuring continuity of its services.

According to sources, the company hasn’t made any headway in sorting out two of the critical issues essential to stay in business – that of opening nodal accounts with other banks and migrating its merchants to other banks.

Apparently, resistance from banks is hurting Paytm. “None of the banks have heeded to any requests coming from Paytm so far,” said a senior executive of a private bank who didn’t want to be named.

“Given the quantum and seriousness of lapses in KYC compliance, we don’t want to do any business with Paytm without exemptions or immunity granted by the RBI,” said another senior executive of a private bank heading its retail business.

Leeway sought

It is learnt that banks have approached to understand if merchants of Paytm can be onboarded on an as-is-where-is basis so that there is no disruption caused in the payments ecosystem. “We have sought time from the regulator to do a complete KYC on the customer. The idea is to ensure that merchants are onboarded and the KYC is completed in a few months after coming on board with the bank,” said one of the bankers quoted above.

Alternatively, if no extra time is granted to them, banks have requested the RBI to give them complete immunity on customers of Paytm onboarded by them. “We shouldn’t be held hostage to Paytm’s deficiencies,” said another senior executive of a private bank.

It is anticipated that the FAQ to be released by the Reserve Bank of India this week, as indicated by the RBI governor while addressing the media in a post-monetary policy meeting, will address these concerns put forth by the banks.

Tough spot

With a registered merchant base of over 320 million, Paytm covers the largest payment network among merchants.

A nodal or settlement account is the account that facilitates receipts and payments for Paytm’s merchants, apart from anchoring other transactions, including those of wallets. A full KYC or know your customer check is critical to ensuring the authenticity of the persons making the remittances.

“Given Paytm’s volumes and the geographical spread of customers, it’s impossible to complete the KYC process is three weeks; we have sought for more time,” said a banker aware of the matter.

Since Paytm has also approached the RBI to seek an extension, it would be interesting to see which of the two requests is entertained by the regulator.

As for granting immunity, doing so in Paytm’s case would be taking a major deviation from the usual practice of the regulator. “RBI has never granted such a one-off,” said a senior executive of a large PSU bank.

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