RBI Asks NPCI To Review Paytm’s Application for UPI Third-Party Provider Status

The Reserve Bank of India (RBI) announced on Friday that it has advised the National Payments Corporation of India (NPCI) to review the application of One97 Communications Ltd (OCL), the parent company of Paytm, to become a Third-Party Application Provider (TPAP) for the Unified Payments Interface (UPI) channel. The UPI is an instant real-time payment system developed by NPCI to facilitate inter-bank transactions through mobile phones.

It said that in case, NPCI grants TPAP status to OCL, it may be stipulated that ‘@paytm’ handles are to be migrated in a seamless manner.

"In the event of NPCI granting TPAP status to OCL, it may be stipulated that ‘@paytm’ handles are to be migrated in a seamless manner from Paytm Payments Bank to a set of newly identified banks to avoid any disruption. No new users are to be added by the said TPAP until all the existing users are migrated satisfactorily to a new handle," the RBI said in a notification on Friday.

A TPAP license is crucial for enabling Paytm users to persist in conducting digital transactions through the Unified Payments Interface (UPI). The National Payments Corporation of India (NPCI) holds the responsibility of overseeing and regulating UPI and its associated financial services operating on the network. Payment Service Providers (PSPs) must acquire a TPAP license directly from NPCI to operate UPI services and streamline merchant transactions through collaborative banks.

Paytm is not currently designated as a TPAP because UPI transactions are channeled through Paytm Payments Bank. In contrast, 22 entities, such as Amazon Pay, Google Pay, Mobikwik, PhonePe, and WhatsApp, possess a TPAP license.

The central bank additionally stated that to ensure a smooth transition of the '@paytm' handle to other banks, NPCI might support the certification of 4-5 banks as Payment Service Provider (PSP) Banks.

"For seamless migration of ‘@paytm’ handle to other banks, NPCI may facilitate certification of 4-5 banks as Payment Service Provider (PSP) Banks with demonstrated capabilities to process high volume UPI transactions. This is in line with NPCI norms for minimising concentration risk1. For the merchants using PayTM QR Codes, OCL may open the settlement accounts with one or more PSP Banks (other than Paytm Payments Bank)," the bank said.

On Friday, the RBI reiterated that individuals holding accounts and wallets with Paytm Payments Bank must make alternative arrangements before March 15, 2024.

The central bank further said

1. The migration of UPI handles as above is applicable only to such customers and merchants who have a UPI handle ‘@Paytm’. For others who have a UPI address or handle other than ‘@Paytm’, no action is required to be taken by them.

2. Similarly, the customers, whose underlying account/ wallet is currently with Paytm Payments Bank, are advised to make alternative arrangement with other banks well before March 15, 2024, as already advised in the FAQs released.

3. It is reiterated that the holders of FASTag and National Common Mobility Cards (NCMC) issued by Paytm Payments Bank, may make alternative arrangements before March 15, 2024, to avoid any inconvenience.

4. All the above actions are undertaken in the sole interest of protecting the customers and payment system from any possible disruptions and are without any prejudice to the regulatory or supervisory actions initiated by RBI against Paytm Payments Bank.