Axis Bank Saves The Day As Paytm Shifts Nodal Account Post RBI’s Refusal To Extend Deadline

Fintech major Paytm on Friday (February 16) said that it has shifted the nodal account of Paytm Payments Bank to Axis Bank. 

In a regulatory filing with the bourses, the fintech major said that the new arrangement has been executed by opening an escrow account with the private bank to ensure merchant settlements continue without a hitch. 

The move is expected to replace the nodal account that OCL (parent One97 Communications) was using with regard to Paytm Payments Bank, the company said in a statement.

“… The shift of the nodal account to Axis Bank (by opening an Escrow Account) will ensure seamless merchant settlements as before. We strive to continue to empower Indians, contributing significantly to the country’s financial inclusion journey,” a Paytm spokesperson added. 

The fintech giant added that its other subsidiary Paytm Payment Services has already been using the services of Axis Bank since its inception.

The development comes close on the heels of the Reserve Bank of India (RBI) refusing to extend the deadline for the termination of the nodal accounts of “One97 Communications and Paytm Payments Services maintained by Paytm Payments Bank”. 

Earlier in an order issued on Friday, the central bank granted partial reprieve to Paytm Payments Bank, as it extended the deadline for business restrictions on the fintech major’s banking unit to March 15 from February 29 earlier.

It also extended the timeline for undertaking deposits or credit transactions or top ups on the platform to March 15, 2024. It also allowed the payments bank to undertake other banking services, such as UPI facility and fund transfers, till March 15.

However, it stuck to its deadline for termination of nodal accounts and directed the company to settle all pipeline transactions, initiated before February 29, in nodal accounts before March 15. It also refused to change the deadline for the user withdrawal of balances from the payments bank’s accounts, prepaid instruments, FASTags, and National Common Mobility Cards. 

In FAQs issued separately, the apex bank also said that Paytm QR codes, soundboxes and card machines will continue to be operational post the March 15 deadline, only if the merchants migrate to other banks. 

This is the reason Paytm appears to have moved quickly to shift its nodal account to Axis Bank to allay any fears of end-customers and merchants.

Earlier on January 31, the RBI issued a directive that barred Paytm Payments Bank from taking any deposits, credit transactions or top-ups in any of its customer accounts post February 29. Afterwards, Paytm’s shares saw a massive selloff as wary investors dumped the stock in droves. 

Even as the company issued multiple clarifications to allay the fears of jumpy investors, its stock hit lower circuit for five consecutive days. The company’s shares have cratered more than 50% in the past two weeks. 

Adding to the woes have been the reports that the payments bank was being probed by the Enforcement Directorate for alleged forex violations, which the company has vehemently denied. 

Shares of the company closed the day 5% higher at INR 341.50 on the BSE on Friday (February 16).