Paytm shifts offline merchant business to subsidiary post-RBI’s PA license
In a significant development, Paytm parent 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 Reserve Bank of India’s (RBI) license to operate as a Payment Aggregator (PA). The approval from the central bank paves the way for PPSL to resume the onboarding of new merchants, a process that had been under an RBI freeze since November 2022.
The transfer of the offline merchant business to PPSL is a strategic decision aimed at ensuring compliance with the RBI’s guidelines for payment aggregators. As a payment aggregator, PPSL will be responsible for facilitating transactions between merchants and customers, and will be required to adhere to the RBI’s regulations and guidelines for the sector.
The RBI had introduced the Payment Aggregator (PA) license in 2020, with the aim of regulating the growing payment aggregator sector in India. The license requires payment aggregators to maintain a minimum net worth of Rs 15 crore, and to comply with various operational and security guidelines. The RBI had also mandated that payment aggregators must obtain a license from the central bank before onboarding new merchants.
Paytm, which is one of the largest payment aggregators in India, had been operating its offline merchant business without a PA license. However, in November 2022, the RBI had directed Paytm to stop onboarding new merchants, citing non-compliance with the PA guidelines. The directive had been a significant setback for Paytm, which had been aggressively expanding its offline merchant business.
The receipt of the PA license by PPSL is a major relief for Paytm, and is expected to enable the company to resume its offline merchant acquisition plans. Paytm has a large network of offline merchants, and the company has been focusing on expanding its presence in the offline space. The PA license will enable PPSL to onboard new merchants, and to offer a range of payment services to its customers.
The transfer of the offline merchant business to PPSL is also expected to have a positive impact on Paytm’s financials. The company has been investing heavily in its offline merchant business, and the PA license is expected to enable PPSL to generate significant revenue from the sector. Paytm has reported significant growth in its revenue from the payment aggregator business, and the PA license is expected to further boost the company’s top-line growth.
The development is also significant from a regulatory perspective. The RBI’s PA license guidelines have been designed to ensure that payment aggregators operate in a secure and regulated environment. The guidelines require payment aggregators to maintain robust security systems, and to comply with various operational guidelines. The PA license issued to PPSL is a testament to the company’s commitment to complying with the RBI’s guidelines, and is expected to enhance the overall security and stability of the payment ecosystem in India.
In conclusion, the transfer of Paytm’s offline merchant business to PPSL, and the receipt of the PA license, is a significant development for the company. The move is expected to enable Paytm to resume its offline merchant acquisition plans, and to generate significant revenue from the sector. The development is also significant from a regulatory perspective, and is expected to enhance the overall security and stability of the payment ecosystem in India.
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