Bankers are wary of fraudulent merchants getting access to their systems during the transfer, they said.
Elevate Your Tech Prowess with High-Value Skill Courses
| Offering College | Course | Website |
|---|---|---|
| IIT Delhi | IITD Certificate Programme in Data Science & Machine Learning | Visit |
| IIM Lucknow | IIML Executive Programme in FinTech, Banking & Applied Risk Management | Visit |
| MIT | MIT Technology Leadership and Innovation | Visit |
“There is a big business opportunity, but there is also the risk factor associated with it, so we will tread carefully and a fresh KYC (know your customer) of the merchants we onboard will help us identify them better,” said a senior executive at a bank that is eyeing the Paytm business.
The Reserve Bank of India (RBI) had cited lapses around the KYC rules and money laundering guidelines while directing Paytm to stop accepting deposits and allowing credit transactions post February 29.
While fresh KYC is a standard procedure, in the situation that the payments bank will have to transfer everything by February 29, additional KYC formalities could end up taking more time, bankers said.
Banks eyeing Paytm’s business include HDFC Bank, Axis Bank and Yes Bank, they said.
Discover the stories of your interest
Emailed queries to these banks did not elicit any response till press time Wednesday.ET in its Wednesday’s edition reported that Paytm founder Vijay Shekhar Sharma met RBI officials on Monday and requested for an extension of the February 29 deadline. However, sources said the regulator is unlikely to grant any such extension.
ETtech“Banks are concerned what will they acquire if such a serious level of KYC lapses has happened,” an industry executive said. “Fresh KYC will require time and cost for banks. So, these bargains will come into play as well.”
The person said banks are being cautious before approaching the regulator for a clearance.
ET reported on February 5 that banks are awaiting the green signal from the RBI before entering into a business transaction with Paytm Payments Bank. And now with issues around scrutiny of the user base coming up, banks are treading more carefully.
One banker noted that during the transfer of the PhonePe base from Yes Bank to ICICI Bank, the regulator was in the loop and the nod came quickly too. But in this case, the regulator is also probing from all angles, the person said.
According to filings made by Paytm, an associate company of the payments bank, there are around 39 million merchants who accept payments via Paytm and there are around 100 million monthly active users of the Paytm app.
Meanwhile, the Directorate of Enforcement (ED) is likely to initiate a formal probe into Paytm to investigate issues flagged in the reference from the RBI.
Sharma had also met finance minister Nirmala Sitharaman on Tuesday in the backdrop of the banking regulator’s action against the fintech firm.
During the analyst call organised by the company on Friday, Paytm chief operating officer Bhavesh Gupta had said there are two options for the transfer of business. One is a fresh onboarding of the merchant, which is simple but time consuming. The second is moving the existing business to other banks in the backend, which will be faster for the merchant.
It looks like banks might insist on the first option, do a fresh KYC, check the merchant, and then offer the payment acceptance infrastructure.
A large chunk of merchants who have been onboarded by Paytm for card payments and UPI payments since 2022 have been mostly done through its partner banks. So, industry insiders said those merchants can continue to accept payments like before.
Paytm Payments Bank went into an embargo in March 2022, since then Paytm has been adding merchants for its partner banks only.