Paytm Gets NPCI Nod To Resume Onboarding New UPI Users After RBI Sanctions In March; Explained!

One97 Communications Limited, the parent company of Paytm, received approval from the National Payments Corporation of India (NPCI) to resume onboarding new users for its Unified Payments Interface (UPI) application. This comes after the Reserve Bank of India (RBI) imposed a temporary halt on new user registrations earlier in 2024.

Paytm, which is one of India's largest digital payment platforms, received the green light from the NPCI following a request made by Vijay Shekhar Sharma, Founder and CEO of One97 Communications, on August 1, 2024. The RBI had initially suspended new user registrations on Paytm's UPI service after issuing directives on January 31 and February 16, 2024, citing procedural and compliance concerns.

The NPCI's approval, as informed by One97 Communications to stock exchanges on October 22, 2024, allows the company to add new users to its UPI services. However, the approval comes with stringent conditions that the company must meet.

While the NPCI's approval is a positive step forward for Paytm, it comes with several responsibilities. One97 Communications is required to strictly adhere to the procedural guidelines and circulars set forth by the NPCI. These include detailed risk management protocols, guidelines for app branding and QR codes, multi-bank partnerships, and compliance with market share regulations applicable to Third-Party Application Providers (TPAP).

Additionally, Paytm must also uphold the regulatory standards outlined in the Payments and Settlement Systems Act of 2007, the Information Technology Act of 2000, and the more recent Digital Personal Data Protection Act of 2023. Another key compliance requirement includes abiding by NPCI's guidelines on the storage of payment system data, first established in 2018, which requires stringent data protection and storage measures.

The company's tri-partite agreement with NPCI and its Payment Service Provider (PSP) banks is another crucial component of the compliance process. This agreement ensures that Paytm's UPI platform remains transparent and accountable in its dealings with banks and users.

The NPCI approval comes at a crucial time for Paytm as the company aims to strengthen its position in India's highly competitive UPI market. With multiple players like Google Pay, PhonePe, and WhatsApp Pay vying for market share, regaining the ability to onboard new users is vital for Paytm's growth trajectory. This approval could help the company tap into the growing digital payments space once again, especially as UPI continues to dominate retail and online transactions in India.

On Tuesday, shares of Paytm (One97 Communications) saw a steep decline, ending nearly 6% lower at Rs 684 per share. Looking at its performance over the last year, Paytm has delivered negative returns of over 25%. However, on a year-to-date basis in 2024, the stock has managed a modest gain of approximately 6%.