On January 31, the RBI instructed Paytm Payments Bank Ltd (PPBL), a subsidiary of Paytm, to cease the majority of its operations by March 15, citing ongoing non-compliance and supervisory issues.
The Reserve Bank of India (RBI) has directed the National Payments Corporation of India (NPCI) to consider a request from One97 Communication Ltd, the parent company of Paytm, to become a third-party application provider (TPAP). This designation would allow Paytm to continue processing payments through the unified payments interface (UPI).
Earlier, on January 31, the RBI instructed Paytm Payments Bank Ltd (PPBL), an affiliate of Paytm, to cease most of its operations by March 15 due to ongoing non-compliance and regulatory concerns. This decision impacted the operations of the Paytm app, which utilized the bank for its nodal account. Paytm subsequently transferred its nodal account to Axis Bank.
To ensure uninterrupted digital payments via the ‘paytm’ handle operated by PPBL, the RBI emphasized the need for additional measures. The central bank highlighted the importance of having multiple payment app providers to mitigate concentration risks in the UPI system.
NPCI, as the governing body for retail payments and settlement systems in India, operates the UPI platform. A TPAP engages in the UPI system through a payment service provider (PSP) bank. Presently, 22 entities hold TPAP licenses, including Amazon Pay, Google Pay, PhonePe, WhatsApp, and TataNeu.
Should NPCI grant TPAP status to Paytm, the RBI specified that ‘@paytm’ handles must seamlessly transition from PPBL to a selected group of newly identified banks. However, no new users should be added until all existing users are successfully migrated to the new handle.
To facilitate the smooth migration of ‘@paytm’ handles, NPCI is tasked with certifying four or five banks as PSP banks with the ability to process high-volume UPI transactions.
For merchants utilizing Paytm QR Codes, the RBI advised the company to establish settlement accounts with one or more PSP banks other than PPBL.
It’s important to note that the migration of UPI handles applies solely to customers and merchants using the ‘@paytm’ UPI handle. Customers with underlying accounts or wallets at Paytm Payments Bank are advised to make alternative arrangements well before March 15.
In a recent development, the RBI issued detailed clarifications for PPBL customers. Wallet users will no longer be able to top-up or transfer funds into their wallets after March 15, except for cashbacks or refunds. Additionally, users of FASTags issued by PPBL must procure a new FASTag from another bank before the deadline, as top-ups and balance recharges will cease after March 15.