RBI stops Paytm Payments Services from signing new online merchants

Paytm Payments Services Ltd (PPSL) is a subsidiary of One97 Communications Ltd (OCL), the parent of Paytm.

OCL had proposed to transfer the payment aggregator (PA) services business undertaken by it to PPSL in December 2020 to comply with the guidelines of the banking regulator. However, the RBI had rejected its application. The company had re-submitted the required documents in September 2021.

(PAs are entities that help e-commerce sites and merchants to accept various payment instruments from customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own.)

In a regulatory filing, Paytm on Saturday said that PPSL has now received a letter from the RBI in response to the application for the authorisation to provide PA services for online merchants.

According to the letter –

• PPSL is required to seek necessary approval for past downward investment from the company into PPSL to comply with FDI guidelines; and
• Stop onboarding new online merchants for now.

Paytm can resubmit the PA application within 120 calendar days.

As per Paytm –

1. There is no material impact of the said development on it’s business and revenues, as the ruling is only related to new online merchants.
2. It can continue serving existing online customers and also onboard new offline merchants, offering them payment services including All-in-one QR codes, soundboxes, card machines etc
3. It hopes to receives necessary approvals post resubmission of the application.

Paytm is nothing new to denials from the regulators. Checkout Paytm‘s track for previous denials.