RBI asks NPCI to examine Paytm's request for continued UPI transactions

The Reserve Bank of India (RBI) on Friday said it has taken certain additional "necessary" steps to ensure seamless digital payments by UPI (Unified Payments Interface) customers using '@paytm' handle operated by the Paytm Payments Bank.

The banking regulator says these measures will minimise concentration risk in the UPI system by having multiple payment app providers.

This comes after Paytm Payments Bank was barred from accepting further credits into its customer accounts and wallets after March 15, 2024. Paytm Payments Bank is 51% owned by Paytm CEO Vijay Shekhar Sharma while the remaining 49% is owned by One 97 Communications.

The National Payments Corporation of India (NPCI) has been advised by the RBI to examine the request of Paytm parent One97 Communication Ltd to become a third-party application provider (TPAP) for UPI channel for continued UPI operations of the Paytm app, as per the norms.

"It has been further advised that in the event of NPCI granting TPAP status to OCL, it may be stipulated that ‘@paytm’ handles are to be migrated in a seamless manner from Paytm Payments Bank to a set of newly identified banks to avoid any disruption," the central bank says, adding that no new users are to be added by the said TPAP until all the existing users are migrated satisfactorily to a new handle.

“For seamless migration of ‘@paytm’ handle to other banks, NPCI may facilitate certification of 4-5 banks as Payment Service Provider (PSP) Banks with demonstrated capabilities to process high volume UPI transactions,” the RBI says. This is in line with NPCI norms for minimising concentration risk, it adds.

For the merchants using PayTM QR Codes, Paytm parent One 97 Communications may open the settlement accounts with one or more Payment Service Provider banks (other than Paytm Payments Bank).

“It is further clarified that: the migration of UPI handles as above is applicable only to such customers and merchants who have a UPI handle ‘@Paytm’. For others who have a UPI address or handle other than ‘@Paytm’, no action is required to be taken by them,” the banking regulator says.

Similarly, the customers, whose underlying account/ wallet is currently with Paytm Payments Bank, are advised to make alternative arrangements with other banks well before March 15, 2024, as already advised in the FAQs released by RBI on February 16, 2024.

It is reiterated that the holders of FASTag and National Common Mobility Cards (NCMC) issued by Paytm Payments Bank, may make alternative arrangements before March 15, 2024, to avoid any inconvenience, the RBI says.

“All the above actions are undertaken in the sole interest of protecting the customers and payment system from any possible disruptions and are without any prejudice to the regulatory or supervisory actions initiated by RBI against Paytm Payments Bank,” it adds.