YES Bank moratorium to impact UPI, digital transactions in India

YES Bank moratorium to impact UPI, digital transactions in India -

YES Bank is accounted for around 40 % of all the UPI transactions in the country at 514 million transactions in January 2020.

YES Bank had managed to clock a major share due to its partnership with UPI-based payments platform Flipkart-owned PhonePe and BharatPe.

YES Bank has over 20 such partnerships with third-party applications, according to the National Payments Corporation of India (NPCI).

India’s UPI (unified payment interface) transactions might take a hit for a month or two as the banking regulator has placed the country’s fourth-largest lender Yes Bank under moratorium. The Reserve Bank of India on Thursday notified that it had imposed moratorium (temporary prohibition) on the Mumbai-headquartered Bank due to a weak financial position that had undergone a steady decline. The Bank had to unable to raise capital to address accumulating loan losses.

In such a scenario, the banking regulator had put a limit on withdrawals at INR 50,000 till April 3. It would lead to a significant decline in digital transactions that were being carried out through UPI, a real-time instant payment mechanism, as account holders are likely to hold onto any discretionary spending. UPI has now recorded 1.32 billion transactions in February 2020, according to the latest data published by National Payments Corporation of India’s (NPCI), the umbrella body for all kinds of digital payments in the country.

Even though YES Bank had been facing trouble for the last few months, it accounted for around 40 % of all the UPI transactions in the country at 514 million transactions in January 2020. The total UPI transactions stood at 1.31 billion, as per data collected from its parent’s site NPCI in January 2020. The other significant players with maximum UPI transactions were Google Pay and Paytm Payments Bank. YES Bank has over 20 such partnerships with third-party applications, according to the National Payments Corporation of India (NPCI).

YES Bank had managed to clock a major share due to its partnership with UPI-based payments platform Flipkart-owned PhonePe and BharatPe. After the Thursday notification from the RBI, PhonePe has been down. “We are temporarily unavailable. We are going through an unscheduled maintenance activity. We apologize for any inconvenience this may cause. We’ll be back soon,” it said in a Tweet while responding to a YES Bank association.

According to sources, officials from the NPCI team were holding a meeting at YES Bank to evaluate the impact on the digital payment ecosystem and verifying the lender’s net settlement position across all payment modes. The moratorium would also impact the day-to-day operations at various FinTechs that were using YES Bank for various purposes be it sponsor Bank or escrow account or any other banking service.

Once the darling of investors, YES Bank had experienced serious governance issues and practices and that the Central Bank was working on to facilitate the restructuring and exploring opportunities to infuse capital to the Bank. Country’s largest public-sector lender State Bank of India has announced on late Thursday that it will bail out YES Bank that got a new chief executive Ravneet Gill in March last.