RBI Clears Paytm for Merchant Onboarding Revival
- RBI grants in-principle approval for Paytm Payments Services to operate as an online payment aggregator.
- 20-month merchant onboarding restriction on Paytm is withdrawn.
- Antfin’s complete exit from Paytm resolves key regulatory hurdles under Press Note 3 norms.
The Reserve Bank of India (RBI) has granted Paytm Payments Services Ltd (PPSL), a wholly-owned subsidiary of One 97 Communications Ltd, in-principle approval to operate as an online payment aggregator, marking a significant milestone for the fintech giant. The approval, disclosed in a stock exchange filing on Tuesday, allows the company to resume onboarding new merchants, ending a regulatory freeze that had been in place since November 2022.
The authorisation is specific to online payment aggregator operations as per RBI guidelines and opens the door for Paytm to strengthen its presence in India’s digital payments market. “Merchant onboarding restrictions placed on Paytm Payments Services Limited… stand withdrawn from the date of this letter”, the company said in its filing. PPSL will be required to adhere to RBI’s 'Guidelines on Regulation of Payment Aggregators and Payment Gateways' issued on March 17, 2020, and updated guidelines issued later.
A payment aggregator licence allows fintech companies to collect and settle digital payments on behalf of businesses, enabling smoother and more secure transaction processing. Paytm had reapplied for the licence in September 2024 after its initial application was deferred, awaiting regulatory clearance for nine months, even as rivals such as PayU, MobiKwik’s Zaakpay, and PBFintech’s lending arm secured approvals.
The delay in Paytm’s licence approval was partly tied to regulatory concerns over foreign shareholding, especially under the Press Note 3 norms of 2020, which mandate prior government approval for investments from countries sharing land borders with India. The Chinese firm Antfin, backed by Alibaba Group, had been a long-standing Paytm investor, but its stake has been gradually reduced.
In August 2023, Antfin transferred a 44% stake in Paytm to CEO Vijay Shekhar Sharma via his overseas entity Resilient Asset Management, and earlier this month, sold its remaining 5.84% stake in One97 Communications for Rs 3,803 crore through a block deal a move described as a 'clean-up' trade. This complete exit addressed one of the key regulatory hurdles.
RBI’s approval also comes after heightened scrutiny of Paytm’s financial entities. In January 2024, Paytm Payments Bank was ordered to halt onboarding of new customers due to compliance concerns. With this fresh authorisation, Paytm is poised to expand its merchant network and regain momentum in India’s competitive digital payments space.
