RBI examines the UPI payment request from Paytm.

One 97 Communications (PAYT.NS), formerly known as Paytm, is requesting to be added as a third-party application provider (TPAP). If approved, this change would allow Paytm to carry on processing payments using the popular unified payments interface (UPI) in India, however it would necessitate the backing of a new group of banks for the service.

As per the RBI, the NPCI has been assigned the responsibility of enabling four to five banks that can manage substantial amounts of UPI payments to function as Paytm service providers. The central bank underlined that until all current users had been successfully moved to a new handle, no new users should be added by the TPAP.

The decision by the central bank follows one that previously ordered Paytm Payments Bank, a Paytm affiliate, to shut down by March 15, 2024. This caused a disturbance for the well-known payment app, which was dependent on the infrastructure of the banking unit.

With 1.6 billion UPI transactions processed each month, Paytm is the third-largest UPI payment app in the nation, after Google Pay and PhonePe, according to data from the NPCI website that was reported by Reuters. The RBI recommended that in order to guarantee the continuous functioning of Paytm QR codes, the company could open settlement accounts with one or more banks.

Additional Paytm developments

Paytm announced in February 2024 that it would be working as a financial partner with Axis Bank. With One97 Communications, Paytm's parent business, transferring its nodal account from Paytm Payments Bank to the latter, Paytm entered this to start the settlement of merchant transactions. Furthermore, following the fintech company's announcement to work with Axis Bank to support merchant settlement, the price of Paytm's shares surged by 5% to reach the upper circuit.

In order to continue offering merchant settlements, Paytm opened an escrow account and moved its nodal account to Axis Bank, according to the company's regulatory filing. Furthermore, the plan is to replace OCL's nodal account with Paytm Payments Bank, with the account serving as its master account and the point of settlement for all consumer and merchant transactions. Since its founding, OCL's wholly-owned subsidiary Paytm Payment Services has made use of the Axis Bank service.