Reserve Bank of India (RBI) has for now declined to entertain Paytm Payments Services’ (PPSL), a wholly owned subsidiary of Paytm, application for an authorisation to provide payment aggregator services for online merchants. The central bank has advised PPSL to resubmit its application within 120 days after taking certain steps.
What The Company Said:
The company in a exchange filing said,” Our 100% subsidiary, Paytm Payments Services Limited (“PPSL”), is in receipt of a letter from Reserve Bank of India (“RBI”) in response to an application from PPSL for the authorization to provide payment aggregator services (“PA application”) for online merchants.
Paytm further said that the firm can continue to onboard new offline merchants and offer them payment services including All-in-One QR, Soundbox, Card Machines, etc.
The firm said that it is hopeful of receiving the necessary approvals in a timely manner and resubmitting the application.
About This Development:
One97 Communications (OCL), which owns the Paytm brand, had proposed to transfer the payment aggregator services business undertaken by it to Paytm Payments Services (PPSL) in December 2020 to comply with payment aggregator (PA) guidelines of the Reserve Bank of India (RBI) but the banking regulator had rejected its application. The company had re-submitted the required documents in September 2021.
Need To Do:
As per the letter, PPSL is required to take the following steps and resubmit the PA application within 120 calendar days:-
1. Seek necessary approval for past downward investment from the Company in to PPSL, to comply with FDI Guidelines
2. Not onboard new online merchants.
How It Will Affect:
PPSL can continue to do business with existing online merchants, for whom the services will remain unaffected.
What are PAs(Payment Aggregator):
PAs are entities that facilitate e-commerce sites and merchants to accept various payment instruments from customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own.
According to RBI’s PAs guidelines, a single entity cannot continue to provide an e-commerce marketplace along with payment aggregator services and such payment aggregator services must be separated from the e-commerce marketplace business.