Paytm Gets UPI Licence :Users Can Continue Using App for UPI Payments After Banking Arm Shutdown

New Delhi: In a major relief for Paytm users, the National Payments Corporation of India (NPCI) has granted a licence to Paytm's parent company One 97 Communications (OCL) to participate in the Unified Payments Interface (UPI) as a third-party application provider (TPAP). This comes just a day before the Reserve Bank of India's (RBI) deadline for Paytm Payments Bank (PPBL) to cease operations kicks in on March 15th.

In a major action against Paytm Payments Bank (PPBL), Reserve Bank of India (RBI), on January 31, directed it to stop accepting deposits or top-ups in any customer accounts, wallets, Fastags and other instruments after February 29. Later, this deadline was extended to March 15. The direction is said to follow persistent non-compliance and continued material supervisory concerns, the central bank said in a statement. Here's what NPCI licence means for Paytm users and merchants.

Third-Party Licence: A New Chapter for Paytm

The NPCI licence essentially allows Paytm to function as a payments platform similar to PhonePe (owned by Walmart Inc.) and Google Pay (GPay), which rely on partner banks' networks for facilitating transactions. This move signifies a significant shift for Paytm, which previously operated under a licence linked to its affiliate PPBL. While Paytm did not directly control PPBL, the bank handled its digital wallets and payments traffic.

Four Partner Banks on Board

NPCI has identified four partner banks for Paytm's UPI transactions: Axis Bank, HDFC Bank, State Bank of India, and Yes Bank. Notably, the '@paytm' UPI handle will be redirected to Yes Bank, enabling a smooth transition for existing users and merchants.

Seamless Shift for Users

The biggest change for users will be the switch in the underlying bank associated with their '@paytm' handle. NPCI has assured a seamless transition, with the handle being redirected to Yes Bank. This will ensure uninterrupted UPI transactions and auto-pay mandates.

According to banking sources where the '@paytm' handle will be retained but will point to one of the four partner banks for settlement purposes. Notably, PPBL's systems will continue to function post-March 15 to facilitate account withdrawals and UPI services for these transactions.

Paytm Welcomes the Move

Paytm issued a press release to inform the stock exchanges". After NPCI's decision, Paytm (OCL) has also given its reaction on this. Paytm said in a filing sent to the stock exchange that the National Payments Corporation of India (NPCI) has today approved the company to participate in UPI as a Third Party Application Provider (TPAP) under the multi-bank model. The company has given this information to BSE and NSE under Rule 30 of SEBI Regulation 2015.

What happens to merchants with PPBL account.

On the merchant side, those who have a current account with PPBL are being individually migrated to other banks. The company has already opened a nodal account with Axis Bank and will open accounts with other banks soon. "Yes Bank shall also be acting as merchant acquiring bank for existing and new UPI merchants for OCL," NPCI said.