Following the recent RBI decision to terminate Paytm's nodal accounts after February 29, One97 Communications Ltd (OCL), the parent company of Paytm, has announced a strategic shift, indicating a move away from dependency on Paytm Payments Bank Ltd (PPB). The company plans to transfer its nodal accounts and QR codes to alternative banking partners.
Paytm has also instructed its field sales executives to transfer merchant QR codes from their current PPB accounts to accounts with alternative banks.
As the deadline approaches for migrating nodal accounts from Paytm Payments Bank, Paytm faces new challenges. Allegations of regulatory non-compliances against Paytm and its entities have surfaced, causing banks to exercise caution in hosting Paytm's nodal accounts.
However, opening a new nodal account with a bank entails compliance with KYC norms, especially for corporate entities like Paytm. Banks conduct tests for potential anti-money laundering (AML) issues during KYC checks. Despite no ongoing investigations or proven charges related to AML, mere suspicion can lead banks to reject a new account application due to KYC deficiencies.
Meanwhile, competitors like PhonePe and Google Pay are seizing the opportunity to migrate Paytm accounts to their platforms without incurring any charges.
While merchants are required to transition their PPB accounts, the positive development is that the QR code, soundbox, or card machine will not necessitate any physical alterations.
Paytm has taken to social media and in-app advisories to dispel any misconceptions regarding the recent regulatory measures by the RBI. Additionally, its field sales executives are actively engaging with merchants, shopkeepers who hold PPB accounts to provide direct clarification.
What is Nodal account?
A nodal account is a specialized bank account used for the purpose of holding funds temporarily during transactions between different parties. In the context of financial services, such as mobile wallets or payment platforms like Paytm, nodal accounts play a crucial role.
They act as intermediaries to ensure smooth and secure financial transactions between users, merchants, and the platform itself. Nodal accounts are essential for maintaining the integrity of financial transactions, preventing misuse, and adhering to regulatory requirements. They serve as a central point for managing and overseeing the flow of funds, facilitating transparency and accountability in the payment ecosystem.
