Lender’s meltdown spells trouble for UPI services
NEW DELHI/BENGALURU: Walmart Inc.’s Indian payments service went down late on Thursday after India’s central bank seized control of Yes Bank and froze transactions with the troubled domestic lender.
Phonepe Pvt Ltd, India’s leading digital payments provider with more than 175 million users, is the largest of a plethora of local startups that relied on the bank to process transactions. Leading business-to-business software platform Udaan asked buyers and sellers on its platform to refrain from using the Udaan Pay QR code, powered by Yes Bank.
Others that depended on Yes Bank included Microsoft’s Kaizala mobile chat app and online travel providers Makemytrip and Cleartrip, according to the website of the country’s official online payments infrastructure operator.
Microsoft did not immediately respond to an email seeking comment, nor did Makemytrip. All succumbed on Thursday evening, when the Reserve Bank of India (RBI) took control of Yes Bank to stem a threat to the nation’s banking system.
“We sincerely regret the long o u t a g e , ” S a meer Ni g a m, Phonepe’s founder and chief executive officer, said on Twitter Friday. “Our partner bank Yes Bank was placed under moratorium by RBI. Entire team’s been working all night to get services back up as soon as possible.”
On Thursday, India’s central bank suspended all transactions involving the capital-starved bank and limited withdrawals to ₹50,000 for the next 30 days. Yes Bank has been a top provider of fintech infrastructure for Indian startups who incorporated its code to offer online payment services. Many use the lender’s software interface to integrate with the country’s digital payments backbone, known as the Unified Payments Interface.among the worst-affected was Bengaluruheadquartered Phonepe, India’s fast-growing digital payments platforms.
Users employ the app to send and receive money, pay for mobile recharges and utilities and even buy gold.
About 8.7 million merchants across the country are on the Phonepe platform, including large online travel services such as redbus, India’s state-owned rail way booking platform IRCTC, and ride-hailing startup Ola.
“We were integrated with Yes Bank’s digital infrastructure for our QR Code payments,” Udaan f o u n d e r Amod Mal v i y a , co-founder of business-to-business platform Udaan said in a phone chat. The Bengalurubased unicorn, which relied on Yes Bank, advised buyers and sellers on its platform not to make any deposits i nto i t s accounts, and asked sellers using Yes Bank to provide an alternative bank account on its app. “We have temporarily paused settlements to Yes Bank accounts,” Udaan said on Twitter.
SHARES FALL 56%
Shares of the bank came under massive selling pressure on Friday, plunging 56% at close.
On BSE, the scrip sank 56.04% to close at ₹16.20 as investors deserted the counter. During the trade, it nosedived 84.93% to ₹5.55—its 52-week low. The shares plummeted 54.89% to close at ₹16.60 on the NSE. The company’s market valuation also dropped ₹5,266.23 crore to ₹4,131.77 crore on BSE.
MORATORIUM CREDIT NEGATIVE: MOODY’S RBI’S moratorium and withdrawal cap on Yes Bank is credit negative, and the lack of coordinated action highlights continued uncertainty around bank resolutions, Moody’s Investors Service said on Friday.
“RBI’S moratorium on Yes Bank is credit negative as it affects timely repayment of bank depositors and creditors,” Moody’s Investors Service vicepresident - senior credit officer, financial institutions, Alka Anbarasu said.
Yes Bank will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment.