PayTM gets NPCI nod to become Third-Party UPI app

The National Payments Corporation of India (NPCI) has granted approval to One97 Communications Limited (OCL), the parent entity of Paytm, to operate as a Third-Party Application Provider (TPAP) in the Unified Payments Interface (UPI) services under the multi-bank model. This approval allows Paytm to continue offering UPI services to its users, following the impending cessation of operations of its banking unit, Paytm Payments Bank Limited (PPBL), post-March 15 due to regulatory action.

Under this arrangement, Paytm will collaborate with four partner banks – Axis Bank, HDFC Bank, State Bank of India, and Yes Bank – who will serve as Payment System Providers (PSPs). These partner banks will facilitate Paytm’s provision of UPI services by connecting the app with the banking channel.

Previously, Paytm operated its UPI services through PPBL, which held the TPAP license. However, with PPBL facing regulatory restrictions, Paytm’s new model involves partnering with established banks as PSPs to ensure continuity in its UPI offerings. Yes Bank will also serve as the merchant acquiring bank for Paytm’s existing and new UPI merchants, and the @Paytm handle will be redirected to Yes Bank to ensure uninterrupted transactions and AutoPay mandates.

NPCI has instructed Paytm to swiftly migrate all existing handles and mandates, as necessary, to the new PSP banks. This move ensures that Paytm users and merchants can seamlessly continue UPI transactions and other services without disruption.

This development is significant for Paytm, which ranks as the third-largest UPI app in India. Despite a slight decline in transaction volumes and value in February compared to January, Paytm remains a key player in the UPI ecosystem, with a substantial portion of its transactions and gross merchandise value (GMV) conducted through UPI channels.

For customers, Paytm’s approval as a third-party UPI app means continued access to UPI-based payment services through the Paytm app, ensuring convenience and ease of transactions. This approval comes as a relief for Paytm users amidst the impending restrictions on certain Paytm services post-March 15, following regulatory actions against PPBL by the Reserve Bank of India (RBI).