Paytm has received approvals from the National Payments Corporation of India (NPCI) to onboard new UPI users. The payments app was suspended by the Reserve Bank of India (RBI) earlier this year, due to which Paytm was restricted from registering new users. However, the latest green signal from the NPCI does not revive the Paytm Payments Bank and only applies to the UPI services. Here are the details.
NPCI Approves Paytm To Register New Users
Paytm’s founder Vijay Shekhar Sharma requested the NPCI to allow the app to onboard new UPI users in August 2024. The NPCI has finally responded to the plea and granted permission for the same.
Under the fresh approval from the NPCI, Paytm can now onboard new users, but only for UPI services. This means that when a new user signs up on the Paytm app, they will only have the option to add their external bank accounts in Paytm, similar to PhonePe, Google Pay, and other UPI apps.
To recall, the RBI imposed sanctions on Paytm Payments Bank in February 2024 as the payments company violated some major regulations. It eventually led to the complete suspension of the Paytm Payments Bank in March 2024. However, since Paytm uses its in-house bank with @paytm virtual payments address (VPA) to process UPI payments, the RBI restrictions also affected Paytm’s regular digital payment services.
Paytm is the third largest UPI payments app in India and it was vital for the company to rescue its UPI ecosystem. Hence, Paytm partnered with Axis Bank, HDFC Bank, State Bank of India, and Yes Bank and transitioned into a Third Party Application Provider (TPAP) with approvals from the RBI and NPCI. This allowed Paytm to continue with its UPI operations in the country, including merchant QRs, P2P, P2M, soundboxes and other services.
However, Paytm was not allowed to onboard new users on its app. The TPAP approval was provided by the RBI and NPCI only to ensure that existing Paytm users do not face any inconvenience. But this also meant that Paytm was left with no room for growth in the booming UPI market of India, which is dominated by PhonePe and Google Pay with a combined market share of over 75%.
What Happens to Paytm Payments Bank?
The NPCI’s nod does not affect the RBI’s sanctions on Paytm Payments Bank, and it continues to remain suspended. Even if a new user registers on Paytm, they will NOT be able to open a new Paytm Payments Bank account or a Paytm wallet.
Existing Paytm users, who previously had a Paytm Payments bank account, are also restricted from using that account. Other services such as Paytm FASTag, NCMC cards, fuel wallet, etc. also continue to remain suspended.
NPCI’s approval is a positive sign for Paytm as it can now explore options to grow itself in the UPI payments ecosystem. However, the complete revival of Paytm to its former glory with all services is still a distant goal. There is no clarity from Paytm, NPCI, or even the RBI on whether these services will be restored.
