Image Source: The Economic Times
Paytm Payments Services Limited (PPSL), a subsidiary of One97 Communications, made headlines today as it received the Reserve Bank of India’s (RBI) in-principle approval to operate as an online payment aggregator. This pivotal development, formalized via RBI’s letter dated August 12, 2025, not only lifts the embargo on onboarding new merchants but also marks a revival of Paytm’s leadership aspirations in the digital payments space after years of regulatory challenges.
India’s digital payments landscape has been on edge regarding Paytm’s regulatory status for nearly three years. The RBI’s green signal now sets the stage for renewed merchant activity, improved transaction volumes, and greater competition in the fintech sector.
Key Highlights of the Announcement
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RBI’s approval to PPSL is limited to online payment aggregator operations under the Payment and Settlement Systems Act, 2007, based on compliance with RBI’s Payment Aggregators and Payment Gateways guidelines from March 2020 and clarifications issued in March 2021.
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The previous restriction imposed in November 2022, barring onboarding of new merchants due to FDI compliance concerns, has now been lifted with this decision.
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Alibaba Group and China’s Ant Financial exited their investments in Paytm in recent weeks, clearing hurdles related to foreign shareholding and paving the way for RBI’s approval.
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In-principle approval entails PPSL completing a comprehensive system audit — including a cybersecurity assessment by a CERT-In empanelled auditor or equivalent — within six months, failing which the approval may lapse automatically.
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PPSL must comply with data storage regulations, digital payment security controls, and guidelines concerning changes in shareholding or transfer of payment system activity.
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Paytm can immediately resume onboarding new merchants onto its online platform, a significant boost for small businesses and startups seeking digital payment solutions.
Background and Regulatory Journey
Paytm first applied for the payment aggregator licence in March 2020. The application hit a snag in November 2022 when RBI rejected it over FDI compliance lapses, asking Paytm to reapply after correcting its ownership structure.
The company subsequently received FDI clearance from the Ministry of Finance and underwent changes in shareholding, notably the exit of foreign investors, which satisfied key regulatory requirements.
Today’s announcement follows PPSL’s re-application in September 2024, demonstrating Paytm’s commitment to compliance and regulatory best practices.
Implications for the Indian Fintech Ecosystem
The removal of onboarding restrictions allows Paytm to capitalize on India’s burgeoning digital economy, facilitating electronic transactions for new and existing merchants across the country.
The sector expects increased payment volumes, which could translate into higher revenues and market share for Paytm. In its recent quarterly report, Paytm’s revenue from operations jumped 28% YoY to Rs 1,918 crore in Q1 FY26, paired with a net profit of Rs 123 crore — underlining solid operational turnaround.
With compliance at the forefront, RBI’s conditions also signal a move toward enhanced security, transparency, and resilience in payment systems nationwide.
Requirements and Next Steps
PPSL must necessarily complete its system and cybersecurity audit within six months from August 12, 2025. The audit covers technological safeguards, data protection standards, and cyber resilience protocols as mandated by RBI’s directives.
Paytm is expected to keep stakeholders informed on its audit progress and any structural changes as required by SEBI (Listing Obligations and Disclosure Requirements) Regulation 30.
Closing Perspective
Today’s RBI approval is a watershed moment and a vote of confidence for Paytm in India’s digital economy. It sets a precedent for regulatory compliance and signals the end of a challenging phase for India’s largest payments platform. As PPSL returns to business-as-usual, merchants and consumers alike can look forward to a more secure, robust, and expansive payment ecosystem in the months to come.
Source: Economic Times, Moneycontrol, Entrackr, Business Today, TradingView, PTI, CNBC-TV18, NSE India corporate disclosures.
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