RBI asks NPCI to examine use of UPI channel to allow Paytm App to continue operations

The Reserve Bank of India (RBI) in the exercise of its powers under section 35A of the Banking Regulation Act, 1949, had put certain business restrictions on Paytm Payments Bank, vide Press Releases dated March 11, 2022, January 31 and February 16, 2024.

On February 16, 2024, the RBI also released a series of frequently asked questions (FAQs) for users, wallet holders, and merchants who use Paytm Payments Bank’s financial services.

As the Paytm Payments Bank cannot accept further credits into its customer accounts and wallets after March 15, 2024, certain additional steps have become necessary to (i) ensure seamless digital payments by UPI customers using ‘@paytm’ handle operated by the Paytm Payments Bank, and (ii) minimise concentration risk in the UPI system by having multiple payment app providers.

The additional steps are as follows:

1. The RBI has directed the National Payments Corporation of India (NPCI) to review One97 Communication Ltd (OCL)’s request to become a Third-Party Application Provider (TPAP) for UPI channel in order to continue UPI functioning of the Paytm app in accordance with the standards.

2. It has also been suggested that, in the event that the NPCI grants OCL TPAP status, ‘@paytm’ handles be moved seamlessly from Paytm Payments Bank to a set of newly designated banks to avoid disruption. No new users will be added by the TPAP until all existing users have been successfully moved to a new handle.

3. 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 risk.

4. For merchants who use PayTM QR codes, OCL may setup settlement accounts with one or more PSP banks (other than Paytm Payments Bank).

It is further clarified that:

1. The migration of UPI handles described above applies exclusively to consumers and merchants using the UPI handle ‘@Paytm’. Others with UPI addresses or handles other than ‘@Paytm’ do not need to take any action.

2. Similarly, customers whose underlying account/wallet is now with Paytm Payments Bank are urged to make alternate arrangements with other banks well before March 15, 2024, as previously instructed in the RBI FAQs posted on February 16, 2024.

To avoid inconvenience, holders of FASTag and National Common Mobility Cards (NCMC) issued by Paytm Payments Bank should make alternate arrangements before March 15, 2024.

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.