One97 Communications Limited (OCL), the operator of Paytm, on April 17, commenced the process of migrating customers to partner payment service provider (PSP) banks, including Axis Bank, HDFC Bank, SBI, and Yes Bank.
Now, every Paytm UPI user will receive a pop-up notification prompting them to provide consent for using Paytm with a new UPI ID associated with one of the four handles: @ptsbi, @pthdfc, @ptaxis, and @ptyes.
Over time, all Paytm users with @paytm handles will receive requests to transition to a new UPI handle with their consent.
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Until now, Paytm UPI customers were utilising Paytm Payments Bank Limited (PPBL), an affiliate of OCL, as their PSP bank. However, this arrangement became unsustainable following the RBI’s stringent sanctions on PPBL.
A PSP serves as the intermediary between the UPI app and the banking channel, facilitating their connection. Only banks have the authority to function as PSPs.
On March 14, the National Payments Corporation of India (NPCI) approved OCL to partake in UPI services as a TPAP within the multi-bank model. This long-awaited licence enables Paytm to sustain its provision of UPI services to its app users, following the cessation of operations by its banking unit, PPBL, after March 15 due to regulatory action.
“Following NPCI’s approval on March 14, 2024, to onboard OCL as a Third- Party Application Provider (TPAP), Paytm has expedited the integration with Axis Bank, HDFC Bank, State Bank of India (SBI), and YES Bank. All four banks are now operational on the TPAP, streamlining the process for Paytm to shift user accounts to these PSP banks,” the company said in a statement to stock exchanges.
Hit On Market Share
According to data from the NPCI website, Paytm’s UPI market share fell to nine percent in March, marking its lowest level in the past four years. NPCI oversees UPI operations.
In February, it declined to 11 percent from the prior month following the RBI’s severe restrictions on its affiliate company, PPBL.
RBI Action On PBBL
The Reserve Bank of India (RBI) took strict action against PPBL in February 2024 due to “persistent non-compliances” identified in an audit report.
The bank was directed to settle all existing transactions and clear its nodal accounts by March 15, 2024.
PPBL was prohibited from accepting any new deposits or processing credit transactions from March 1, 2024 onwards. This included restrictions on transactions via wallets.
These actions effectively meant that PPBL’s core functionalities as a payments bank were suspended.
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