Paytm Payments Services Limited (PPSL), a wholly-owned subsidiary of One 97 Communications Limited, has received preliminary approval from the Reserve Bank of India (RBI) to operate as an online payment aggregator under the Payment and Settlement Systems Act of 2007.
This authorization follows PPSL's re-application for the license in September 2024, after the RBI rejected its initial application in November 2022. The license will allow Paytm to onboard new online merchants, increase payment transaction volumes, and increase revenue, all while removing regulatory uncertainties and strengthening its position in the digital payments industry.
Key Highlights
- Paytm Payments Services gets RBI’s in-principle nod to operate as an online payment aggregator.
- The approval lifts the ban on onboarding new merchants, restoring Paytm’s ability to expand its digital payments reach.
"Paytm Payments Services Limited (PPSL), a wholly-owned subsidiary of One 97 Communications Limited (OCL or the Company), seeks a Payment Aggregator (PA) license. We would like to inform you that the Reserve Bank of India (RBI) has granted PPSL in-principle authorization to operate as an Online Payment Aggregator under the Payment and Settlement Systems Act, 2007," according to the filing.
According to the RBI's communication, PPSL must follow the payment aggregator and gateway guidelines published in March 2020, as well as any subsequent clarifications.
The central bank clarified that Paytm Payments Services' in-principle authorization only applies to payment aggregator (PA) operations, as outlined in the RBI's Payment Aggregators and Payment Gateways Regulation Guidelines.
It also stated that transactions that fall outside the scope of the PA-PG guidelines, such as payout transactions conducted on behalf of merchants, are not permitted to be processed through escrow accounts designated for PA activities.
As part of the conditions, the RBI has directed PPSL to conduct a comprehensive system audit, including a cybersecurity assessment, by an auditor accredited by CERT-In, a Certified Information Systems Auditor (CISA) registered with ISACA, or a professional holding the DISA qualification from the Institute of Chartered Accountants of India.
The audit must assess compliance with the Master Direction on Cyber Resilience and Digital Payment Security Controls for Non-Bank Payment System Operators, issued on July 30, 2024, and the RBI's data storage circular for payment systems, dated April 6, 2018.
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PPSL is required to submit the system audit report within six months of receiving the RBI letter. Paytm has stated that failure to meet this deadline will result in the automatic expiration of the in-principle authorization, and no final approval will be granted.
Furthermore, the RBI has advised PPSL to follow the guidelines issued on July 4, 2022, which require prior approval for any changes in shareholding, acquisition of control, or transfer of payment system operations for non-bank payment system providers.
