RBI asks NPCI to review Paytm’s application for third party application provider

RBI has instructed the National Payments Corporation of India (NPCI) to review One97 Communication’s (OCL) request to become a third party application provider (TPAP) for the UPI channel on the Paytm app.

“It has been further advised that in the event of NPCI granting TPAP status to OCL, it may be stipulated that ‘@paytm’ handles are to be migrated in a seamless manner from Paytm Payments Bank to a set of newly identified banks to avoid any disruption. No new users are to be added by the said TPAP until all the existing users are migrated satisfactorily to a new handle,” said RBI in its press release.

These directives apply to only those customers and merchants who have @paytm UPI handle.

Payment service providers (PSPs) need to obtain a TPAP license from NPCI to run UPI services and facilitate merchant transactions through partner banks, as per the current regulations. Twenty-two entities, including Amazon Pay, Google Pay, Mobikwik, PhonePe, and WhatsApp, currently have a TPAP licence.

Paytm is presently not classified as a TPAP due to UPI transactions being routed through Paytm Payments Bank.

In order to mitigate concentration risk, RBI has also directed NPCI to certify four-five banks as payment service provider banks capable of handling high volume UPI transactions to partner with Paytm. This is in line with NPCI norms for minimising concentration risk, it said.

Merchants using Paytm QR codes may see settlement accounts opened with one or more PSP banks other than Paytm Payments Bank.

The regulator has reiterated that those customers with underlying account/ wallet with Paytm Payments Bank should make alternative arrangements with other banks well before 15 March.

Holders of FASTag and National Common Mobility Cards (NCMC) issued by Paytm Payments Bank have also been instructed to make alternative arrangements before the deadline.

With RBI asking Paytm Payments Bank to wind down operations and shut its nodal accounts by 15 March, the TPAP licence is crucial for Paytm to continue its operations, amid concerns of RBI revoking the payments bank licence once customers and merchants have migrated to other platforms or linked their accounts to other banks. The regulator had earlier rejected Paytm’s request for a payment aggregator licence.

Last week, RBI asked OCL to shift its nodal accounts to Axis Bank from Paytm Payments Bank, which will allow the company to continue operating Paytm QR, Soundbox and card machines even after the 15 March deadline set by the RBI.

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Published: 23 Feb 2024, 08:12 PM IST