Paytm is in exploratory talks to sell its wallets business and Jio Financial Services and HDFC Bank are the leading contenders to acquire the business, according to a report by Hindu BusinessLine.

Paytm’s wallet business is housed under Paytm Payments Bank.

As per the report, Paytm has been in talks with Jio Financial Services since November last year for a deal.

“With KYC-related issues compounding for Paytm, they’ve not been as aggressive with the business as they were prior to 2022 in the wallets business and if valuations on the table were decent, the talks with Jio would have fructified much earlier,” a banker was quoted in the report as saying.

Mukesh Ambani-controlled Jio Financial Services, however, denied being in talks with One97 Communications to acquire Paytm's wallet business. "We clarify that the news item is speculative and we have not been in any negotiations in this regard," the company said in a regulatory filing late in the night. 

Earlier, the Reserve Bank of India (RBI) barred Paytm Payments Bank from taking deposits and credit transactions across its services from 29 February.

Following the RBI’s punitive action, the fintech major might sell the business to ensure continuity for Paytm’s existing wallet users. 

“You could call it a distress sale. In such a situation, valuation is the last thing that Paytm can hold on to,” a fintech expert was quoted as saying.

The report also said that Paytm reached out to HDFC Bank for a deal just before the RBI came out with the crippling order.

HDFC's digital wallet, Payzapp, has around 14 million users.

The financial daily quoted a source as saying that given there is a reasonable overlap between HDFC Bank customers and Paytm wallet users and many customers of the former continue to use Paytm wallet over Payzapp, a deal with Paytm could address this issue for the bank.