Paytm crisis: One97 Communications shifts nodal account to Axis Bank for seamless transactions

Paytm parent One97 Communications on Friday said it has shifted its nodal account to Axis Bank from Paytm Payments Bank. This was declared in a regulatory filing. The move will allow continuity of Paytm QR, Soundbox, card machine after the March 15 deadline set by the Reserve Bank of India, the filing said.

WIth this Axis Bank is expected to replace the nodal account that One 97 Communications was using with Paytm Payments Bank. Paytm Payments Bank has been utilising the Axis Bank's services since its inception.

Earlier this evening, the RBI extended the deadline for Paytm Payments Bank Ltd (PPBL) to March 15 from February 29 from stop accepting fresh deposits and do credit transactions. It said Paytm Payments Bank can continue business as usual, which means customers can make deposits, credit transactions, prepaid services, wallets, FASTags, National Common Mobility Cards till March 15.

However, the central bank said customers and merchants of Paytm Payments Bank to shift their accounts to other banks by March 15.

The company said it has shifted its nodal account to Axis Bank (by opening an Escrow Account) to continue seamless merchant settlements as before. This arrangement is expected to seamlessly replace the nodal account that OCL was using with Paytm Payments Bank.

"The company has also shifted its nodal account to Axis Bank (by opening an escrow account) to continue seamless merchant settlements as before. This arrangement is expected to seamlessly replace the nodal account that OCL was using with Paytm Payments Bank. Paytm Payment Services Ltd (PPSL), OCL's wholly owned subsidiary has already been using the Axis Bank services, since its inception," Paytm said in a filing.

The nodal account of Paytm is like a master account in which all its customers, merchant transactions are settled. In trap system or third-party application provider, a payment processor app needs a sponsor bank to access UPI.

As per RBI guidelines, UPI operates through a three-leveled structure. The first operator is NPCI, which holds ownership to the conduit responsible for transferring funds. The second level is payment service providers (PSP), also known as sponsor banks, tasked with providing users with QR codes or UPI IDs—essential tools needed by users to gain access to this financial pipeline. The third layer is third-party providers such as Google Pay and Amazon Pay. From now on, Axis Bank will act as the PSP.

RBI also issued a set of FAQs, where it had hinted that a sponsor bank will step in for Paytm's dealings.

Question: I am a merchant and I accept payments using a Paytm QR code, Paytm soundbox or Paytm POS terminal, linked to another bank account (not with Paytm Payments Bank). Can I continue to use this set-up even after March 15, 2024?

RBI's answer: Yes. If your receipt and transfer of funds is linked to any bank account other than Paytm Payments Bank, you can continue to use this arrangement even after March 15, 2024.

On other aspects, like salary, subsidies & direct benefit transfers getting credited into Paytm Payments Bank account, the RBI said customers will not be able to receive their salaries into their account with PPB after March 15 and has suggested that customers make 'alternative arrangements to avoid inconvenience'.

Paytm clarified that merchants with fund transactions connected to any bank account other than Paytm Payments Bank need not worry about disruptions.

The RBI in the list of FAQs has clarified that Paytm QR code, Paytm Soundbox or Paytm POS terminal will continue to work after March 15 if it is linked to other banks instead of PPBL.

Also read: RBI extends deadline for services of Paytm Payments Bank to March 15 for customers