Despite the ban placed on Paytm Bank, One97 Communications, the parent firm of Paytm, received approval to become a third-party service provider on the country’s Unified Payments Interface (UPI) infrastructure.
Indian fintech giant Paytm has obtained approval from the National Payments Corporation of India (NPCI) to become a third-party service UPI provider. The news sent shares of Paytm’s parent company, One97 Communications, up 5%.
Unified Payments Interface (UPI) is a national system in India that allows users to make instant money transfers by linking banks with fintech apps. It is also available globally via open APIs.
The positive news came after a turbulent period for Paytm. In February, the Reserve Bank of India (RBI) banned Paytm Payments Bank – Paytm’s exclusive banking partner – from all forms of banking services, including bank transfers and accepting deposits. Besides, RBI has passed information about thousands of suspicious bank accounts registered in Paytm Payments Bank and suspected of money laundering to the country’s financial crime-fighting agency.
Nevertheless, Paytm app itself remained unaffected by the troubles with its banking partner. The fintech terminated intercompany agreements with its affiliate bank and started accelerating partnerships with other financial institutions.
Considering the latest approval, Paytm can now launch UPI services backed by several financial institutions, including Axis Bank, HDFC Bank, State Bank of India, and Yes Bank. The latter will reportedly act as the merchant acquiring bank for current and new UPI merchants linked with One 97 Communications. This way, the existing “@Paytm” handle on the platform will now direct transactions to Yes Bank.
The company has also shifted its nodal account to Axis Bank (by opening an Escrow Account) to continue seamless merchant settlements via Paytm QR, Soundbox and Card machines.
