The Reserve Bank of India (RBI) has imposed operational constraints on Paytm Payments Bank Limited (PPBL), stipulating a deadline that prohibits the bank from conducting business beyond March 15.
This stringent measure prompted Paytm’s parent company, One97 Communications, to explore new alliances for its Unified Payments Interface (UPI) operations. According to a report by Moneycontrol, the State Bank of India (SBI) is now among four major banks—also including Yes Bank, Axis Bank, and HDFC Bank—that will support Paytm’s consumer-facing UPI payments.
Transitioning to alternative banking partners
In response to the RBI’s limitations, Paytm has taken proactive steps to transition its operations, ensuring continuity for its merchants and customers. The company has relocated its nodal accounts to Axis Bank for settling UPI payments, a pivotal move to sustain its digital payment ecosystem post-March 15.
These actions aim to comply with regulatory mandates and mitigate disruptions to its services.
Significance of TPAP license
The National Payments Corporation of India (NPCI) is anticipated to grant Paytm a third-party application provider (TPAP) license by the RBI’s deadline. This license holds paramount importance for Paytm to persist in offering UPI payment services through its app despite PPBL’s operational suspension.
TPAPs play a vital role in the UPI framework, ensuring adherence to NPCI guidelines and facilitating regulatory supervision.
Ensuring seamless migration and adherence
To ensure uninterrupted services, the RBI has instructed the seamless migration of customers and merchants with ‘@paytm’ handles from PPBL to a select group of newly designated banks. This directive underscores the necessity of upholding a stable and dependable digital payment infrastructure, particularly for a major entity like Paytm, which holds a substantial market share in the UPI domain.
Paytm’s standing in the UPI arena
Despite regulatory hurdles, Paytm retains its pivotal position in India’s digital payment landscape. The company ranks as the third-largest app for UPI transactions in the country, processing billions of transactions monthly. Collaborations with major banks and the expected TPAP license are poised to fortify Paytm’s market presence, ensuring it continues delivering valuable services to its extensive user base.
