Users of Paytm’s wallet services, which are currently run by Mobile VAS company One97 Communications, will be shifted to Paytm Payments Bank Ltd, the company has announced via a public notice in the newspapers.
— Vijay Shekhar (@vijayshekhar) December 5, 2016
According to the notice, the switch from One97 Communications to Paytm Payments Bank will such that the capacity of the KYC Wallet will remain the same. Wallets without KYC (Know Your Customer verification) will have the same limits as before,(currently at Rs 20,000 during the demonetization, other wise Rs 10,000), as Wallets with KYC (Rs 1 lakh). The transfer of account to the Payments Bank will be done without explicit consent of the customer, though they have the right to decline the transfer by December 21, 2016, as per the notice. In that case, they will have the option to transfer the money out of the wallet into their bank account, but what is clear is that if the account isn’t transferred to Paytm Payments Bank, customers will not be able to transact with the wallet.
This doesn’t mean that the Payments Bank has been approved by the RBI yet, only that the business is being transferred to a new entity, which will need approval of the RBI.
So far, Airtel is the only entity to commence payments bank operations. Airtel got its payments bank license from the RBI in April.
Why the individual has been given a license
What’s interesting here is that according to the statement, Vijay Shekhar Sharma, the CEO of Paytm, is the licensee for the Payments Bank limited. This reminds us that when the license was awarded, Sharma had told MediaNama that the in-principle nod was given Paytm, and not to him as an individual. Sun Pharma founder Dilip Shantilal Shanghvi was the other individual to be granted a license.
Because of shareholding issues. Shanghvi had partnered with IDFC and Norewegian telecom major Telenor (he subsequently returned the license), while Sharma runs One97 Communications which has foreign funding from Chinese ecommerce and payments major Alibaba (an issue which is becoming political, so much so that it prompted a “we are as Indian as Maruti” statement from Sharma).
According to Mint, Sharma has invested Rs 112 crore in the business, while the rest of the Rs 220 crore investment has come it from One97 Communications. He will own 51% in Paytm Payments Bank, while One97 will hold the rest. According to RBI guidelines, promoters of the payments bank should hold at least 40% of its paid-up equity capital for the first five years of its operations. Meanwhile, foreign shareholding in the payments bank would be as per the FDI policy for private sector banks, currently capped at 74% of the paid-up capital from all sources.