Paytm Payments Bank Asked To Stop Onboarding New Customers; Re-apply for Payment Aggregator Licence
Moneylife Digital Team 28 November 2022
The Reserve Bank of India (RBI) has asked Paytm Payments Services (Paytm) Ltd to re-submit the application to operate as a payment aggregator. The banking regulator put a pause on onboarding of online merchants by Paytm. The company will not on-board new online merchants until approvals remain pending.
 
The company in an exchange filing, said," Our 100% subsidiary, Paytm Payments Services Limited (PPSL), is in receipt of a letter from RBI in response to an application from PPSL for the authorization to provide payment aggregator services (PA application) for online merchants."
 
One97 Communications (OCL), which owns the Paytm brand, had proposed to transfer the payment aggregator services business undertaken by it to Paytm in December 2020 to comply with payment aggregator (PA) guidelines of RBI but the banking regulator had rejected its application.
 
The company had re-submitted the required documents in September 2021.
 
As per the letter, Paytm is required to take the following steps and re-submit the PA application within 120 calendar days:
 
1. Seek necessary approval for past downward investment from the company into Paytm, to comply with foreign direct investment (FDI) guidelines.
 
2. Not onboard new online merchants.
 
"There are no material observations other than what is mentioned above. This has no material impact on our business and revenues, since the communication from RBI is applicable only to onboarding of new online merchants."
 
Paytm further said that the firm can continue to on-board new offline merchants and offer them payment services including All-in-One QR, Soundbox, Card Machines, etc.
 
Similarly, Paytm can continue to do business with existing online merchants for whom the services will remain unaffected.
 
The firm said that it is hopeful of receiving the necessary approvals in a timely manner and re-submitting the application. PAs are entities that facilitate e-commerce sites and merchants to accept various payment instruments from customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own.
 
According to RBI's PAs guidelines, a single entity cannot continue to provide an e-commerce marketplace along with payment aggregator services and such payment aggregator services must be separated from the e-commerce marketplace business.
 
RBI’s decision to make Paytm re-apply for a licence to be an online payment aggregator has increased regulatory uncertainty, according to Morgan Stanley.
 
"Key to track would be required timelines to get necessary FDI approvals," Morgan Stanley said. "In addition, we are closely monitoring RBI action around final guidelines on digital payment charges and the existing ban on Paytm Payments Bank to onboard new customers."
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