Reliance Industries spinoff Jio Financial Services said Monday evening that it is not negotiating with Paytm to acquire its wallet business, quashing “speculative” media reports as the Noida-headquartered firm scrambles to put out a fire from the central bank’s clampdown last week.
The Hindu Business Line reported over the weekend that Paytm and Jio Financial Services have been engaging for months for a deal, something that escalated after the Indian central bank widened its crackdown on Paytm’s Payments Bank, the unit that processes transactions for financial services giant Paytm. Shares of Jio Financial Services jumped more than 15% on local exchanges Monday on the speculative reports. The market cap of Paytm, on the other hand, has shrunk by more than 40% in the last three business days.
On Tuesday, Paytm and Paytm Payments Bank also clarified that neither of them have engaged with Jio Financial Services and any report suggesting otherwise is “factually incorrect.” Paytm shares jumped 5.5% on the news Tuesday morning.
The RBI has barred Paytm Payments Bank from offering many banking services, including accepting fresh deposits and credit transactions across its services. Paytm, the parent firm of ubiquitous mobile payments app with the same name, has said that it will terminate business with its affiliate and seek partnership with other banks for continuity of many of its core businesses.
TechCrunch first reported last week that the Reserve Bank of India is considering levying additional penalties on Paytm and may revoke its bank permit. Paytm Payments Bank, an affiliate of Paytm, houses the 330 million wallet customers of Paytm. In early 2018, when Paytm received the Payments Bank license — which allows the holder to offer customers a savings account of up to $2,400 — it had to surrender its PPI license, the permit required to operate the wallet business.
Reliance listed its little-known non-bank financial subsidiary Jio Financial Services last year. Jio Financial Services owns about a 6% stake in Reliance and is increasingly expanding its lending and insurance businesses.
Story updated with Paytm’s Tuesday comment.