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The RBI asked Paytm to stop onboarding new users until it completes the migration of the existing accounts to these banks. The RBI had earlier directed Paytm Payments Bank to stop offering banking services after March 15.
To continue merchant payments — the service that allows businesses to accept payments from customers using platform — One 97 Communications that owns Paytm has been asked to create settlement accounts with one or two banks. Paytm has already said that it was in the process of migrating accounts to Axis Bank from its affiliate payments bank for business continuity.
In a news release on Friday, the RBI said it directed National Payments Corporation of India (NPCI), the operator of the UPI platform, to examine One 97 Communications’ request to become a third-party application provider (TPAP) for the UPI channel. Getting NCPI’s approval will allow the Paytm app to continue offering UPI-based payment services.
ET had written on February 10 that Paytm is trying to become a TPAP on UPI, just like its other rivals Google Pay and PhonePe.
All this while Paytm could issue virtual payment addresses to its users with the @paytm handle through Paytm Payments Bank. Google Pay and PhonePe handles have the names of the banks providing payment services to them.Paytm didn’t immediately respond to ET’s request for comment.Shares of One 97 Communications ended Friday’s trade 5% higher, their upper circuit limit, at Rs 407.60 on the BSE. The benchmark Sensex closed nearly flat.
To ensure a seamless migration, the RBI has asked NPCI to allow four to five banks to become payment service provider banks for Paytm. These banks should have the capability to process high volumes of UPI transactions, it said.
Major lenders like HDFC Bank, Axis Bank and Yes Bank could become the PSP for Paytm. Given the large volume of UPI payments processed by Paytm, the regulator wants multiple banks to support these transactions to minimise concentration risk.
In January, Paytm settled 1.4 billion UPI transactions through its application, data from NPCI show. As many as 410 million transactions were processed through Paytm Payments Bank accounts and 2.8 billion UPI payments were made into a Paytm Payment Bank account, the data show.
These clarifications from the regulator will finally allow banks to move in on the Paytm business. Senior bankers had told ET earlier that unless they receive explicit instructions from the RBI, they will not move in to take on the Paytm business.
However, for merchant payments, banks might ask for a fresh KYC of the base to ensure fraudulent merchants are kept away, industry insiders said.
Further reiterating its previous statements in the FAQs released on February 16, the RBI said Paytm FASTag and National Common Mobility Card (NCMC) will cease to operate from March 15. Even users of Paytm wallet should look for alternative options. This means Paytm food wallets and prepaid wallets among others will cease to operate from March 16.
The central bank had on January 31 directed Paytm Payments Bank to stop offering basic banking services from the end of February. The deadline was subsequently relaxed to March 15.
Friday’s RBI order draws the curtains on Paytm’s banking and mobile wallet business and brings it on a par with other fintechs like Google Pay, Amazon Pay and PhonePe, which offer payment services through UPI.
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