The Reserve Bank of India has barred Paytm Payments Services (PPSL) to not onboarding new online merchants for its payment services. The company can continue to do business with the existing online merchants and the services will remain unaffected for them. PPSL can also onboard new offline merchants and offer them payment services, including All-in-One QR, Soundbox, and Card Machines. This move comes after the central bank said that the company will have to reapply for a license to be an online payment aggregator.
Paytm Payment Services is a 100 per cent subsidiary of parent company One97 Communications. Payment aggregators were required to be registered with RBI by September 2022 as these companies providing payment aggregator services were treated as outsourcing agents of banks. And according to the RBI regulation, such companies need to register to be recognized as independent service providers.
Among other large payment gateway players, Paytm is the only one to receive a rejection from the regulator. Razorpay, Pine Labs, Cashfree, and CCAvenues have received an in-principle nod from the regulator. Mobikwik’s application has also been rejected by the RBI as the company failed to meet networth requirements.
The central bank said that PPSL is required to re-submit its PA application within 120 calendar days. Meanwhile, Paytm responded that its application is “not rejected”. A company’s spokesperson said, “The RBI has not rejected our application, but has simply asked us to reapply in 120 days. We are taking all the necessary steps and are hopeful of getting the required approvals soon.”
In Paytm’s regulatory filing RBI has asked PPSL to seek necessary approval for past downward investments from the company to PPSL and to comply with the foreign direct investment guidelines. “There are no material observations other than what is mentioned above. This has no material impact on our business and revenues since the communication from RBI applies only to onboarding of new online merchants,” the company said in its filing.