In a significant development, the National Payments Corporation of India (NPCI) has granted approval to Paytm's parent company, One 97 Communications, to function as a third-party application provider on the Unified Payments Interface (UPI) infrastructure.
This approval marks a pivotal moment for Paytm, as it can now offer UPI payment services through a multi-bank model, similar to its competitors PhonePe and Google Pay. This move signifies a departure from its previous exclusive partnership with its associate entity, Paytm Payments Bank Ltd. Paytm Payments Bank, where One 97 Communications holds a 49% stake, is mandated to cease providing banking services starting March 15, following a directive from the Reserve Bank of India.
Under this new arrangement, Axis Bank, HDFC Bank, State Bank of India, and Yes Bank will serve as payment system providers to One 97 Communications, according to NPCI, the entity overseeing UPI operations.
Moreover, Yes Bank will also take on the role of the merchant acquiring bank for both existing and new UPI merchants associated with Paytm.
To ensure a smooth transition, transactions under the "@Paytm" handle, previously facilitated through the payments bank, will now be redirected to Yes Bank. This ensures uninterrupted UPI transactions and autopay mandates for existing users and merchants. NPCI has urged One 97 Communications to swiftly migrate all existing handles and mandates to the new PSP banks as necessary.
Earlier on March 13, it was reported that these four banks would support consumer UPI payments on the Paytm platform.
This migration necessitates Paytm, headquartered in Noida, to issue fresh UPI handles to its customers.
Expressing gratitude, Paytm founder Vijay Shekhar Sharma took to the microblogging platform X, saying, "Thank you NPCI, committed to grow UPI to new heights together," on Thursday.
In a prior move on February 17, Paytm had shifted its nodal accounts, or escrow accounts, to the private-sector lender Axis Bank, ensuring uninterrupted merchant payments on its platform. This decision came after RBI's directive for Paytm to close all nodal accounts with Paytm Payments Bank by February 29.
Furthermore, on March 1, Paytm announced a mutual agreement with the payments bank to discontinue various inter-company agreements to reduce dependencies.
According to NPCI data, the Paytm app initiated 1.3 billion UPI payments in February, settling around Rs 1.5 lakh crore through the platform.
