RBI Directs NPCI To Approve 4-5 Banks For '@paytm' UPI Migration
The Reserve Bank of India (RBI) has told the National Payments Corporation of India (NPCI) to consider the request of One97 Communication, the parent company of Paytm, to become a Third-Party Application Provider (TPAP) for UPI transactions.
To make it easier for '@paytm' customers to move to other banks, NPCI may certify four to five banks as Payment Service Provider banks with the ability to handle many UPI transactions, the RBI said.
RBI issued the instructions to ensure that the Paytm app can still handle UPI transactions and to reduce the risk of depending too much on just one payment app provider. Only customers and merchants with an '@paytm' UPI handle will have their accounts moved. A UPI handle or Virtual Payment Address (VPA) is a digital ID that allows users using the platform to send and receive funds through UPI-enabled apps. Most UPI apps, like PhonePe and BharatPe, work with a partner bank that provides a VPA on their behalf. For example, if a UPI account is linked to YesBank, the VPA will end with '@ybl'.
The RBI stated that the actions are solely to protect customers and the payment system from potential disruptions, and are not related to any regulatory or supervisory actions taken by the RBI against Paytm Payments Bank.
Customers with accounts/wallets at Paytm Payments Bank are advised by the regulator to make other arrangements with different banks before 15 March, 2024. The RBI said that "No new users should be added by the TPAP until all existing users are successfully moved to a new handle."
Earlier, One97 Communications moved its nodal account from Paytm Payments Bank to Axis Bank, as stated in a regulatory filing. This was done to ensure the continuation of essential Paytm services, like QR codes, Soundbox, and card machines, even after the 15 March deadline set by the central bank.
Last month, the RBI instructed Paytm Payments Bank to stop accepting new deposits from 29 February, 2024, due to "persistent non-compliances" and "continued material supervisory concerns." The deadline was later extended to 15 March.
