Paytm is the third largest app for UPI payments in the country.
The Reserve Bank of India has come out with additional measures to ensure seamless digital transactions via unified payments interface or UPI. The directions apply exclusively to current @paytm UPI handle users. No action is required for those using UPI addresses other than @paytm.
The central bank in January ordered Paytm Payments Bank, an associate of One 97 Communications (OCL) - also known as Paytm, to stop accepting any fresh deposits in its accounts, or wallets, from February 29. That deadline was extended to March 15.
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The RBI has advised the payments authority National Payments Corporation of India (NPCI) to examine a request from Paytm to become a third-party application provider (TPAP). for UPI channel for continued UPI operation of the Paytm app, as per the norms.
It has also asked to ensure that all '@paytm' handles are to be migrated in a seamless manner from Paytm Payments Bank to a set of newly identified banks to avoid any disruption. No new users are to be added by the said TPAP until all the existing users are migrated satisfactorily to a new handle.
For "seamless migration", the RBI has asked the NPCI to facilitate the certification of four to five banks as Payment Service Provider (PSP) Banks with demonstrated capabilities to process high-volume UPI transactions.
Merchants using Paytm QR codes may see settlement accounts opened with PSP banks other than PSP banks if Paytm decides to pursue this course.
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Earlier this month, Paytm shifted its nodal account to Axis Bank (by opening an escrow account) to continue seamless merchant settlements as before. It had then insisted that its QR codes, soundbox and card machines would continue to work beyond the RBI's March 15 deadline.
The deadline extension, the RBI said, was to allow customers, including merchants, "a little more time" to make alternative arrangements.
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It said that no further deposits or credit transactions or top-ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards, etc after March 15, 2024.
Customers can withdraw or use funds from their Paytm Payments Bank accounts and wallets until the time those funds are exhausted but they cannot add any fresh funds after March 15, it added.
The regulator also asked customers who get their salaries or other transfers including government subsidies into these accounts to make alternate arrangements by mid-March.
Merchants using Paytm's QR codes for accepting payments can continue to do so if these QR codes are linked to accounts other than those held by Paytm Payments Bank.
Paytm Payments Bank has nearly a fifth share of India's toll collections through a product called FASTag. The RBI said these FASTags cannot be recharged or topped up after March 15.
Paytm is the third largest app for UPI payments in the country, processing 1.6 billion monthly transactions, according to data available on the NPCI website. PhonePe and Google Pay are the two largest.
With inputs from Reuters.