The National Payments Corporation of India (NPCI) has given approval to One97 Communications Limited (OCL), Paytm’s parent entity, to become a third-party UPI service provider. The approval received on March 14 says that the fintech can act as a third-party UPI service provider "under a multi-bank model.”
A provider of third-party applications offers UPI-enabled services to customers, allowing them to conduct transactions using the Unified Payments Interface. Initially, Paytm Payments Bank used to support its UPI services.
Axis Bank, HDFC Bank, State Bank of India, and YES Bank shall act as the payment service providers, according to a release by the NPCI. Further, YES Bank will also be acting as the merchant “acquiring bank for existing and new UPI merchants,” as per the release by NPCI. So, the @Paytm handles of the merchants will be directed to YES Bank.
The NPCI has advised Paytm to immediately migrate its existing handles and mandates to the new banks. This comes after the central bank issued restrictions on Paytm Payments Bank for “persistent non-compliances and continued material supervisory concerns." The restrictions were supposed to come into effect on March 15.
Previously, Paytm Payments Bank had a Third Party Application Provider (TPAP) license, so it was not dependent on external banks. Other similar platforms, such as Google Pay and PhonePe, have separate banks.
Recently, Reuters reported that Paytm was in constant communication with the NPCI. It said, “The TPAP license approval will come before March 15, and most of the checks have been completed.”
