India's apex bank Reserve Bank of India (RBI) may finally have some 'good news' for Paytm
Payments Bank
. According Reserve Bank of India (RBI), India’s banking regulator, has suggested the National Payments Corporation of India (
NPCI
) to consider Paytm’s proposal to become a platform for
peer-to-peer payments
. This move indicates a possible softening of the
RBI
’s position.
The RBI has reportedly recommended that NPCI should look into the request from One97 Communications Ltd., Paytm’s parent company, to become a platform that handles transactions from other banks. This would allow users to continue making peer-to-peer payments through the
Paytm
app.
Until now, One97 Communications has primarily used Paytm Payments Bank Ltd to handle most of its transactions, including those made by customers using the NPCI’s network. However, recent restrictions imposed by the RBI prevent Paytm Bank, a part of Vijay Shekhar Sharma’s fintech conglomerate but not owned by One97, from processing new payments after March 15. This has prompted Paytm to seek new banking partners to manage its payments and financial services operations.
What went wrong for Paytm Payments Bank
On January 31, the banking authority prohibited Paytm bank from accepting new credits in its customer accounts or mobile wallets after February 29. This decision significantly impacted Paytm’s overall financial and payments services operations. The restricted bank, which can accept deposits but cannot lend, was given an additional two weeks to wind down much of its operations.
The NPCI’s Unified Payments Interface (UPI), backed by the state, is an innovative system that enables users to make immediate money transfers by connecting banks with fintech apps like Paytm, PhonePe owned by Walmart Inc., and Google’s GPay. This system has facilitated digital payments for hundreds of millions of Indians who do not use credit cards. In January, UPI processed transactions worth 18.41 trillion rupees ($222 billion).
Last week, the banking regulator also instructed NPCI to ensure that Paytm app users can continue to use the UPI service without interruption. The central bank added that the NPCI could permit four to five banks to facilitate UPI transactions on the Paytm app.
RBI says relief to Paytm aimed to protect customers
The RBI stated that these measures are being taken solely to protect customers and the payment system from potential disruptions.
Despite the disruption to its payments bank, the RBI’s directives suggest that Paytm could continue to expand its fintech services and product offerings.
In a separate development, Paytm has partnered with Axis Bank Ltd. to replace Paytm Payments Bank as the primary entity for its merchant payments settlement operations.
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