Paytm Bank Crises : How will it Change India's digital life

Paytm, India's leading digital payment platform, was founded in 2010 by Vijay Shekhar Sharma under the banner of One97 Communications. recently found itself amid a crisis that sent shockwaves through the industry. The company once hailed as the leader of the fintech sector, suddenly found its stability called into question, The storm clouds began to hit in January 2024 when the Reserve Bank of India (RBI) issued a directive that shook Paytm to its core. The RBI mandated that Paytm Payments Bank, a subsidiary of One97communications must immediately halt the operations.

Before diving deep into the crises and how they will impact the common man's life, let us understand some key aspects.

• Payments bank vs. Regular bank A payment bank is a special bank that solely performs the limited banking tasks that the Banking Regulation Act of 1949 authorizes. They are restricted from engaging in lending activities like issuing loans and credit cards. Payment banks can only offer services such as savings accounts, remittance services, bill payments, Debit cards, and mobile banking. They can only take deposits of up to Rs 1 lakh per person. Commercial banks are typically owned by private investors, government entities, or a combination of both. In contrast, Payment banks are usually owned by a variety of entities, including telecommunications companies, retail chains, non-banking finance companies (NBFCs), or individuals.

• Nodal Accounts A Nodal account is a special type of bank account required to be opened by businesses (intermediaries) for holding money on behalf of vendors and customers. How will the Paytm Payments Bank crisis affect us?

Reserve Bank of India has announced a ban on Paytm Payment Bank due to violation of rules. After 15 March 2024, there will be some changes for the people using the Paytm wallet and UPI services.

(A) If you already have money in your PPBL account, you can transfer it to another place but no amount can be deposited in the account.

(B) if you have linked your Paytm account to a regular bank that the government of India authorizes you can use Paytm and UPI services as usual.

(C) You are required to change the PaytmQR code.

(D)Fastag is an electronic toll collection system operated by the National Highway Authority of India. Customers can use their remaining balance in the Fastag wallet but cannot deposit more money in the Fastag account.

Conclusion

The Paytm bank crisis has left customers grappling with uncertainty, trust issues, and potential disruptions to their financial services. How one97communications responds to these challenges, rebuilds trust, and addresses customer concerns will be crucial in determining the long-term impact of the crisis on its customer base and market standing.