Paytm shifts offline merchant business to subsidiary post-RBI’s PA license
The digital payments landscape in India has witnessed a significant development with Paytm, one of the leading players in the market, making a strategic move to comply with the regulatory requirements set by the Reserve Bank of India (RBI). In a recent development, Paytm’s parent company, One 97 Communications, has completed the transfer of its offline merchants’ payment business to its wholly-owned subsidiary, Paytm Payments Services Limited (PPSL). This move comes after PPSL received the RBI license to operate as a Payment Aggregator (PA), a crucial step towards resuming the onboarding of new merchants.
The RBI had introduced the Payment Aggregator (PA) license to regulate the payment aggregators in the country, ensuring that these entities operate in a secure and transparent manner. The license is mandatory for all payment aggregators, and companies like Paytm, which have a significant presence in the offline merchant payment space, need to comply with these regulations. By transferring its offline merchant business to PPSL, Paytm is ensuring that it is in compliance with the RBI’s guidelines and can continue to operate its payment business without any disruptions.
The transfer of the offline merchant business to PPSL is a significant development, as it will enable Paytm to resume the onboarding of new merchants, a process that had been under an RBI freeze since November 2022. The freeze had been imposed by the RBI as part of its efforts to regulate the payment aggregators and ensure that they comply with the regulatory requirements. With the PA license in place, PPSL will now be able to onboard new merchants, which will help Paytm to expand its offline merchant base and increase its market share in the digital payments space.
The RBI’s PA license is a stringent regulation that requires payment aggregators to meet certain criteria, including having a minimum net worth of Rs 15 crore, maintaining an escrow account with a scheduled bank, and ensuring that all transactions are settled directly into the merchant’s bank account. The license also requires payment aggregators to have a robust risk management system in place, which includes measures to prevent money laundering and terrorist financing.
By obtaining the PA license, PPSL has demonstrated its commitment to complying with the RBI’s regulatory requirements and ensuring that its payment business operates in a secure and transparent manner. The license will also enable PPSL to offer a range of payment services to its merchants, including credit and debit card transactions, net banking, and UPI transactions.
The development is also significant for Paytm’s merchants, who will now be able to avail of the payment services offered by PPSL. With the onboarding of new merchants set to resume, Paytm’s offline merchant base is likely to expand, which will help to increase the company’s revenue and market share in the digital payments space.
The move is also expected to have a positive impact on the overall digital payments ecosystem in India. With the RBI’s PA license in place, payment aggregators like Paytm will be able to operate in a more secure and transparent manner, which will help to increase consumer trust and confidence in digital payments. The license will also encourage more merchants to adopt digital payments, which will help to drive the growth of the digital economy in India.
In conclusion, the transfer of Paytm’s offline merchant business to PPSL is a significant development that demonstrates the company’s commitment to complying with the RBI’s regulatory requirements. With the PA license in place, PPSL will be able to resume the onboarding of new merchants, which will help to expand Paytm’s offline merchant base and increase its market share in the digital payments space. The development is also expected to have a positive impact on the overall digital payments ecosystem in India, driving the growth of the digital economy and increasing consumer trust and confidence in digital payments.
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