Paytm Gets Lifeline: NPCI Allows UPI Transactions Through Four Banks

In a significant move to ensure uninterrupted payment services for Paytm users, the National Payments Corporation of India (NPCI) has granted approval to One97 Communications Limited (OCL), the owner of the Paytm brand, to continue Unified Payments Interface (UPI) transactions through four banks - State Bank of India (SBI), Axis Bank, HDFC Bank, and YES Bank. This decision comes as a relief for Paytm users, as the Reserve Bank of India's (RBI) deadline of March 15 looms, barring Paytm Payments Bank Ltd (PPBL) from accepting deposits, credit transactions, or top-ups in customer accounts.

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Multi-Bank Model for UPI Transactions

Under the new arrangement, NPCI has approved OCL to participate in UPI as a Third-Party Application Provider (TPAP) under a multi-bank model. The four designated banks will act as Payment System Provider (PSP) banks to OCL, ensuring continuity in UPI transactions for Paytm users. Additionally, YES Bank will serve as the merchant acquiring bank for existing and new UPI merchants for OCL.

Seamless Transition for Existing Users

To facilitate a seamless transition, NPCI has directed OCL to redirect the @Paytm handle to YES Bank. This will enable existing users and merchants to continue UPI transactions and auto-pay mandates without any disruption. OCL has been advised to complete the migration process for all existing handles and mandates to the new PSP banks at the earliest.

RBI's Actions and Paytm's Response

The RBI's regulatory actions against PPBL stem from persistent non-compliance and supervisory concerns. In January, the central bank directed PPBL to cease accepting deposits and top-ups, citing material supervisory concerns. Subsequently, the deadline was extended to March 15. In response to these actions, Paytm founder Vijay Shekhar Sharma stepped down as the part-time non-executive Chairman of Paytm Payments Bank Limited, and the bank's board was reconstituted with experienced banking professionals.

FASTag Users Advised to Switch

Paytm FASTag users have been advised by the National Highways Authority of India (NHAI) to obtain a new FASTag from another bank before March 15. This is necessary to ensure a smooth travel experience and avoid inconvenience at toll plazas.

NPCI's decision to allow Paytm to continue UPI transactions through multiple banks provides a sigh of relief for its vast user base. The multi-bank model and seamless transition process aim to minimize disruptions and ensure uninterrupted payment services for Paytm customers. As the regulatory landscape evolves, Paytm and other fintech companies will need to adapt and comply with the guidelines to maintain the trust and confidence of their users.