Paytm Gets In-Principle RBI Nod As Online Payment Aggregator

One97 Communications' wholly-owned company Paytm Payments Services Limited (PPSL) has gotten Reserve Bank of India (RBI) in-principle authorisation to operate as an online payment aggregator.

This clearance will enable PPSL to start onboarding new merchants once again, whose process was held up for over a year. This clearance is accompanied by some riders also, final clearance will be granted only after the company complies with all the regulatory requirements as mandated by RBI.

Why The Freeze Was Imposed

In November 2022, RBI asked PPSL to halt onboarding new merchants until its payment aggregator license application was under process. The regulator also asked the company to re-apply once it had addressed some compliance gaps.

Meanwhile, PPSL continued to transact on behalf of existing merchants but could not onboard merchants. The restriction remained in place for more than a year, slowing down the company's payments business growth.

What Payment Aggregators Do

Payment aggregators facilitate merchants to accept debit card payments, credit card payments, Unified Payments Interface (UPI), and digital wallet payments without setting up individual arrangements with the banks or payment networks.

To become a payment aggregator, firms need to comply with RBI norms on governance, minimum net worth, settlement of transactions on time, storage of data in India, and sound risk management techniques. Such services are provided only by licensed institutions.

Previous Regulatory Steps

Paytm's financial services division has also experienced other regulatory measures in recent years. Paytm Payments Bank, a subsidiary company of One97 Communications, was ordered to suspend new onboarding of customers in March 2022 until supervisory concerns were resolved.

In January 2024, RBI directed the bank to stop accepting deposits and conducting credit transactions after a given date. Although these measures were independent of the activities of PPSL, they formed part of a broader pattern of regulatory intervention in the financial services businesses of Paytm.

Terms Related To The Approval

The in-principle authorisation is then followed by a system audit, which is to take place within a defined timeframe. This will check for conformity with RBI guidelines in the areas of cybersecurity, operational resilience, and digital payment security. The authorisation can proceed to the final step only when the audit report is satisfactory to RBI.

PPSL must also seek RBI's prior approval for any major change in ownership or control, in line with the rules for payment system operators.

With the freeze lifted, PPSL can rebuild its merchant base. Once it fulfils all the licence requirements, it will be ready to have full authorisation to operate freely as an online payment aggregator. This would enable the company to accept additional merchants and expand the range of payment schemes on its platform.