MUMBAI: Paytm Payments Bank, which India’s central bank has ordered to wind down by Feb. 29, is seeing transactions it handles slowly drop off as customers are uncertain what will happen in March, according to two sources directly aware of the matter.
There has been only a 10%-15% decline in transaction volumes handled via Paytm Payments Bank so far, and if the pace doesn’t quicken the central bank may extend the deadline, according to the sources, who declined to be identified as they are not authorised to speak to the media.
Paytm Payments Bank is the banking unit of One 97 Communications, widely known as Paytm for its digital payment app.
The Reserve Bank of India (RBI) has ordered the bank to stop accepting deposits to accounts or digital wallets and to halt the processing of payments from end-February.
Data on the drop-off in transactions has not been previously reported and is key to whether the central bank will extend the deadline for customers to transition away from the Paytm bank.
“We are not in a position to comment as Paytm Payment Bank Limited is under the supervisory engagement of the regulator,” a spokesperson for the digital bank said in response to a query.
An email to RBI was not answered. Paytm Payments Bank has over 300 million accounts or digital wallets and around 40 million merchants who use the bank’s QR-codes or payment app. Once the payments bank is shut, Paytm app payments can be done through other banks who use the service.
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Since the central bank’s order on Jan. 31, Paytm has mobilized its sales team to reassure merchants using its payment product that apps services will still function, even as Walmart and Google target those same vendors with rival offerings, Reuters reported earlier this week.
Customers are not clear whether digital wallets with Paytm Payments Bank and QR-codes will remain operational after Feb. 29, said one of the sources, which has meant there is no urgency to switch to other means of accepting payments.
“Another reason for the slow transition may be that customers and merchants have multiple payment options and there is no rush to switch,” the second source said. RBI will assess the payment data closer to the deadline but is open to extending it for the sake of customer convenience, said another source, who also declined to be identified.
“Suitable steps” will be taken to ensure that customer inconvenience is minimised, RBI Deputy Governor Swaminathan J. said on Thursday. Since the central bank’s Jan. 31 order, Paytm shares have declined 45%, eroding around $2.6 billion in investor wealth.
Paytm shares closed down 6% on Friday.
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