The Reserve Bank of India (RBI) recently announced a series of measures to ensure the continuity of seamless digital payments through the @paytm handle operated by Paytm Payments Bank beyond the 15th of March deadline. This decision comes amidst concerns regarding the halt of further credits to accounts and wallets of the bank’s customers after the specified date.
One of the key directives issued by the RBI involves instructing the National Payments Corporation of India (NPCI) to review One97 Communication’s (OCL) request to become a Third Party Application Provider (TPAP) for the Unified Payments Interface (UPI) channel on the Paytm app. This move aims to enable Paytm to continue offering UPI services to its customers even if they are required to migrate from Paytm Payments Bank to other banks.
In its press release, the RBI highlighted the importance of a seamless migration process for existing @paytm UPI handle users. It suggested that if NPCI grants TPAP status to OCL, the migration should be carried out smoothly to a new set of banks to avoid any disruptions. Furthermore, no new users should be added by the TPAP until all existing users are successfully migrated to the new handle.
It’s essential to note that payment service providers (PSPs) must obtain a TPAP license from NPCI to operate UPI services and facilitate merchant transactions. Currently, 22 entities, including Amazon Pay, Google Pay, Mobikwik, PhonePe, and WhatsApp, hold a TPAP license. However, Paytm is not classified as a TPAP due to its UPI transactions being routed through Paytm Payments Bank.
To address concentration risk concerns, the RBI directed NPCI to certify four to five banks as payment service provider banks capable of handling high volume UPI transactions to partner with Paytm. This aligns with NPCI norms aimed at minimizing concentration risk in payment ecosystems. Additionally, merchants using Paytm QR codes may witness settlement accounts being opened with one or more PSP banks other than Paytm Payments Bank.
The RBI reiterated that customers with underlying accounts or wallets with Paytm Payments Bank should make alternative arrangements with other banks well before the 15th of March deadline. Similarly, holders of FASTag and National Common Mobility Cards (NCMC) issued by Paytm Payments Bank have been advised to make alternative arrangements before the deadline.
With the RBI’s directive to Paytm Payments Bank to wind down operations and close its nodal accounts by the 15th of March, obtaining a TPAP license becomes crucial for Paytm to sustain its operations. There are concerns that the RBI may revoke the payments bank license once customers and merchants have migrated to other platforms or linked their accounts to other banks. It’s worth mentioning that the regulator had previously rejected Paytm’s request for a payment aggregator license.
Last week, the RBI instructed One97 Communications to transfer its nodal accounts to Axis Bank from Paytm Payments Bank. This move enables the company to continue operating Paytm QR, Soundbox, and card machines even after the 15th of March deadline, ensuring minimal disruption to its services.