PayTM receives NPCI approval to continue UPI services through multi-bank model

The National Payments Corporation of India (NPCI) has granted approval to One97 Communications Limited (OCL), the parent entity of Paytm, to participate in Unified Payments Interface (UPI) services as a third-party application provider (TPAP) under the multi-bank model.

This eagerly anticipated license enables Paytm to sustain its UPI services for app users following the cessation of operations by its banking unit, Paytm Payment Bank Limited (PPBL), post 15 March, 2024.

Under the new framework, Paytm will collaborate with four new partner banks—Axis Bank, HDFC Bank, State Bank of India, and Yes Bank—who will function as its Payment System Providers (PSPs). It had previously been reported that NPCI, the governing body of UPI payments, has been working in conjunction with banks to expedite the TPAP process by March 15. Previously, Paytm was offering UPI services through PPBL, which held the TPAP license.

Moneycontrol in a report said that Yes Bank will serve as the merchant acquiring bank for Paytm's existing and new UPI merchants. An NPCI statement said that this will enable existing users and merchants to continue to do UPI transactions and AutoPay mandates in a seamless and uninterrupted manner. Additionally, NPCI has advised Paytm to ensure the swift migration of all existing handles and mandates, where necessary, to the new PSP banks.

This move underscores Paytm's commitment to providing uninterrupted digital payment services to its vast user base and further strengthens the ecosystem of digital payments in India. The approval marks a significant milestone for Paytm, solidifying its position as a key player in India's rapidly evolving digital payments landscape.

Last month, the Reserve Bank of India (RBI) implemented significant restrictions on the operations of Paytm Payments Bank Ltd (PPBL). These measures included directing PPBL to halt the acceptance of deposits or top-ups in customer accounts, wallets, FASTags, and other instruments after February 29.

The regulatory action followed the discovery of major irregularities in Know Your Customer (KYC) procedures, which posed serious risks to customers, depositors, and wallet holders. Governor Shaktikanta Das in a later press briefing explained that the Paytm case does not stem from regulatory deficiencies but rather from compliance issues.

“The regulations are in place. They are robust. It is not a case of regulatory deficiency. It is an issue of compliance with various parameters. I don't want to specify the details,” Governor Shaktikanta Das stated in response to reporters’ inquiries during the press conference regarding the RBI's actions against Paytm's banking arm.