After Axis Bank, Paytm now in talks with Yes Bank to open a nodal account

Paytm is currently in discussions with Yes Bank to establish a nodal account for One 97 Communications & Paytm Payment Services, a person directly in the know told CNBC-TV18.

This move is aimed at ensuring seamless merchant settlements beyond March 15, by when the Reserve Bank of India (RBI) has asked Paytm Payments Bank to stop all banking activities.

Previously, Paytm managed its nodal accounts through its own bank, Paytm Payments Bank.

However, regulatory directives from the RBI necessitated the termination of these accounts, prompting Paytm to seek alternatives.

Last month, Paytm collaborated with Axis Bank to establish a nodal Escrow Account for OCL, Paytm Payment Services, and if negotiations prove successful, Yes Bank will become the second bank to facilitate such arrangements.

This setup will enable the handling of large UPI transaction volumes that Paytm processes between the two banks.

For the banks, this collaboration presents dual advantages. Firstly, it will earn fees for facilitating merchant settlements on behalf of Paytm. Secondly, it gains access to float available in these accounts, allowing the bank to deploy funds in money markets to generate additional income.

Simultaneously, Paytm has applied for third-party application provider (TPAP) status with the NPCI, CNBC-TV18 has learnt.

For this, Paytm has secured consent from Axis Bank and Yes Bank to serve as payment service providers (PSPs) for its UPI channel, as per sources. Furthermore, discussions are underway with SBI and HDFC Bank for similar PSP partnerships, CNBC-TV18 has learnt.

RBI had recently directed NPCI to certify 4-5 banks as Payment Service Provider (PSP) Banks for Paytm to ensure the eamless migration of '@paytm' handles to other banks who are equipped to process high-volume UPI transactions.

These strategic initiatives are designed to ensure uninterrupted payment services for Paytm's customers despite the cessation of banking operations from March 15.

In a separate development, One 97 Communications has disclosed to exchanges that Paytm and PPBL have mutually agreed to discontinue various inter-company agreements. Additionally, shareholders of the bank have consented to simplifying the Shareholders Agreement to enhance governance, irrespective of their individual interests.