Fintech player Paytm, via its subsidiary Paytm Payments Services Limited (PPSL), has received in-principle approval from the Reserve Bank of India (RBI) to operate as an online payment aggregator under the Payment and Settlement Systems Act, 2007.
What This Means
- Merchant Onboarding Resumes: The approval allows PPSL to restart onboarding new merchants, ending the freeze that has been in place since November 2022 due to compliance issues.
- Conditions Apply: The nod is conditional—PPSL must complete a cybersecurity and systems audit by RBI-specified entities and submit the report within six months, failing which the in-principle approval could lapse.
Why It Matters
- Revenue Impact: Payment services currently contribute to over half of Paytm’s consolidated revenue, making this approval crucial for its business recovery. Reuters
- Investor Confidence Booster: Following the announcement, Paytm’s parent company One97 Communications saw a ~5% surge in its stock, reaching a 52-week high, reflecting renewed investor optimism.
Background & Context
| Issue | Details |
|---|---|
| Regulatory Roadblocks | In November 2022, RBI blocked PPSL from onboarding new merchants due to violations related to foreign direct investment (FDI) norms. |
| Ant Group Exit | The approval follows the full exit of China’s Ant Group (Antfin), which sold its remaining 5.84% stake in Paytm, easing regulatory constraints related to FDI limits. |
| Banking Unit Freeze | Paytm Payments Bank (a different entity) had faced its own restrictions in early 2024, with RBI ordering a halt on deposits and onboarding due to supervisory concerns. |
