Paytm partners with Axis Bank

The collaboration follows the Paytm Payments Bank's recent crisis, where the Reserve Bank of India (RBI) prevented the banking unit from receiving further deposits, engaging in credit transactions, or accepting wallet uploads as of 29 February 2024. However, the deadline was extended to 15 March 2024, providing the bank with more time to close its operations. 

Paytm entered its partnership with Axis Bank to initiate the settlement of merchant transactions, with One97 Communications, the parent company of Paytm, moving its nodal account to the latter from Paytm Payments Bank. Additionally, Paytm share price increased by 5% to hit the upper circuit after the fintech company’s decision to collaborate with Axis Bank for the continuation of merchant settlement.

Through this move, the company aims to ensure the continuity of Paytm QR, Soundbox, and card machine after the deadline of 15 March 2024 set by the Reserve Bank of India, as per a regulatory filing by the enterprise. The announcement comes after the RBI advised all merchants and customers to move their accounts from Paytm Payments Bank to other banks before the deadline, with it being extended by 15 more days to close most operations, including deposit and credit transactions. Moreover, the RBI clarified that the Paytm QR code, Paytm Soundbox, and Paytm POS terminal are set to continue to work after 15 March 2024 if linked to other banks instead of Paytm Payments Bank.

According to Paytm’s regulatory filing, the company also shifted its nodal account to Axis Bank by opening an escrow account to continue providing merchant settlements. Additionally, the arrangement is projected to replace the nodal account that OCL was leveraging with Paytm Payments Bank, with the account being its master account where all transactions by customers and merchants are settled. Paytm Payment Services, OCL’s wholly-owned subsidiary, has been using the Axis Bank service since its inception.

The Financial Intelligence Unit (FIU) submitted a report to RBI indicating that there were Know Your Customer (KYC) irregularities in accounts linked with Paytm Payments Bank, raising money laundering concerns. The RBI took action against the banking unit due to non-compliance with regulations and supervisory concerns. The order issued by the RBI also influenced Paytm’s market value, which significantly declined. Despite reassurances received at that time from Paytm’s officials, the unit experienced a consecutive 20% dip for the second day, with it facing a loss of approximately USD 2 million.

Furthermore, through its directive, the RBI intended to bring Paytm to compliance, as in 2023, the regulatory body fined the banking unit USD 650,000 for non-compliance, including violations of KYC rules. Also, in 2022, the bank was restricted from onboarding new customers and underwent a comprehensive audit of its IT systems, following Paytm’s stock market listing and concerns about its valuation and business model.

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