RBI directs NPCI to examine Paytm’s request for being third-party app for UPI

The Reserve Bank of India (RBI) advised the National Payments Corporation of India (NPCI) on Friday, February 23, to examine Paytm’s request to become a third-party application provider for unified payments interface (UPI) payments.

“NPCI has been advised by the RBI to examine the request of One97 Communication to become a third-party application provider (TPAP) for UPI channel for continued UPI operation of the Paytm app, as per the norms,” the central bank said in a statement on Friday (February 23).

If approved, this would allow Paytm to continue processing payments via UPI, but will need a set of newly identified banks to back the app. The NPCI should facilitate four to five banks, with an ability to process high volumes of UPI payments, to act as service providers to Paytm, the RBI said of Friday.

According to the RBI, the directive has been issued to ensure seamless digital payments by UPI customers using ‘@paytm’ handle (operated by the Paytm Payments Bank) and minimise concentration risk in the UPI system.

“No new users are to be added by the said TPAP until all the existing users are migrated satisfactorily to a new handle,” said the RBI.

Paytm is the third largest app for UPI payments in the country, processing 1.6 billion monthly transactions, according to data available on the NPCI website. PhonePe and Google Pay are the two largest.

To keep Paytm QR codes running, the company may open settlement accounts with one or more banks, the RBI said. Paytm said last week it had signed on Axis Bank to act as a banking partner.

On January 31, the central bank had imposed major business restrictions on PPBL, including a restriction on accepting fresh deposits and doing credit transactions after February 29. On February 16, it extended the deadline to March 15.