Jio Financial Services’ shares jumped 14% on Monday to reach the day’s high of Rs 288.75 on the BSE, following a newspaper story claiming that One 97 Communications, which is facing a crisis, is in discussions to sell its wallet business with HDFC Bank, a private sector lender, and the Mukesh Ambani-owned NBFC.
HDFC Bank and Jio Financial are reportedly among the front-runners to purchase Paytm’s wallet business, which is housed under Paytm Payments Bank, according to senior fintech and banking sector executives with knowledge of the situation, as The Hindu Business Line reported.
According to the report, which also stated that Jio may offer to acquire Paytm Payments Bank as part of a larger bailout plan, talks with HDFC Bank started just before RBI’s ban on Paytm Payments Bank. Vijay Shekhar Sharma’s team is reportedly in talks with Jio Financial since last November.
Paytm’s critical position
Since the Reserve Bank of India prohibited Paytm from taking deposits or credits to user accounts, the payment bank has been experiencing an existential crisis. In light of potential money laundering and know-your-customer (KYC) infractions at Paytm, the regulator is reportedly also thinking about revoking the banking license.
The RBI also discovered that hundreds of thousands of customers’ KYC checks were lacking and that some of the accounts either belonged to people who had previously had problems with law enforcement or had unusually high balances—in some cases, amounts reaching crores of rupees. Over 1,000 accounts have been opened using a single permanent account number, which has been reported to the central bank on several occasions.
As ET had previously reported, security officials are investigating the potential that the organization is being used as a front to launder money.
Paytm, meanwhile, has refuted rumors that the Enforcement Directorate is looking into allegations of money laundering against the company, its founder, and its CEO.
Paytm’s stock fell 42% in just three days after the RBI’s directive.
Jio Financial’s strategy
Jio Payments Bank, which has re-platformed to introduce digital savings accounts and bill payments with a ground network of 2,400 business correspondents, is owned by Jio Financial, which separated from the incubator Reliance Industries (RIL) last year. Debit cards have also been introduced by it.
In the payment solutions space, Jio has implemented QR codes throughout the ecosystem, activated UPI on Jio phones, and launched a test program for Jio Voice boxes.
JFSL has finished the consumer durable loan and personal loan sandbox with success. But since the RBI tightened its regulations on consumer unsecured lending, the business has put more of an emphasis on secured lending, which includes leasing as a product.
Jio Finance, Jio Insurance Banking, Jio Payments Bank, Jio Payments Solutions, a planned AMC, and a leasing company are among the subsidiaries of JFSL.
Jio Financial and HDFC to acquire Paytm?
According to earlier reports, Paytm is reportedly in early discussions to sell its wallet business with possible investors.
According to reports, Jio Financial Services and HDFC Bank are dominating the competition for the acquisition. Additionally, JFS has requested permission to work with BlackRock Financial Management on mutual fund activities. The two companies intend to make a $150 million initial investment together.
Shares of JFS were up 15.80% to Rs 293.90 on the National Stock Exchange (NSE) at approximately 2:22 pm. On the other hand, due to regulatory issues, Paytm shares had a 43% decrease in three trading sessions and were stuck at a 10% lower circuit limit.
