RBI reviews Paytm's UPI payment request

Formally known as One 97 Communications (PAYT.NS), Paytm is asking to become a third-party application provider (TPAP). If accepted, this move would enable Paytm to continue processing payments via India's widely-used unified payments interface (UPI), albeit requiring a new set of banks to support the application. 

According to the RBI, the NPCI is tasked with facilitating four to five banks capable of handling high volumes of UPI payments to serve as service providers for Paytm. The central bank emphasised that no new users should be added by the TPAP until all existing users are satisfactorily migrated to a new handle. 

The central bank's decision comes after a previous directive for Paytm Payments Bank, a subsidiary of Paytm, to cease operations by 15 March 2024, causing disruption for the popular payment app, which relied on the banking unit's infrastructure. 

Data from the NPCI website cited by Reuters indicates that Paytm ranks as the third largest app for UPI payments in the country, processing 1.6 billion monthly transactions, trailing PhonePe and Google Pay. To ensure the continued operation of Paytm QR codes, the RBI suggested that the company may establish settlement accounts with one or more banks.

Other developments from Paytm

In February 2024, Paytm announced a partnership with Axis Bank to serve as a banking partner. Paytm entered this to initiate the settlement of merchant transactions, with One97 Communications, the parent company of Paytm, moving its nodal account to the latter from Paytm Payments Bank. Additionally, Paytm share price increased by 5% to hit the upper circuit after the fintech company’s decision to collaborate with Axis Bank for the continuation of merchant settlement. 

According to Paytm’s regulatory filing, the company also shifted its nodal account to Axis Bank by opening an escrow account to continue providing merchant settlements. Additionally, the arrangement aims to replace the nodal account that OCL was leveraging with Paytm Payments Bank, with the account being its master account where all transactions by customers and merchants are settled. Paytm Payment Services, OCL’s wholly-owned subsidiary, has been using the Axis Bank service since its inception.