Talks on the same have begun with the National Payments Corporation of India (NPCI), the entity overseeing the UPI ecosystem in the country, it added.
Read also | Ashneer Grover on Paytm Crisis: 60-year-olds running RBI no…
VPA Changes for Paytm Users
Following RBI’s regulatory directive, the Paytm app will transition to a third-party app, integrating UPI through other lenders. Currently, Paytm UPI users have virtual payment addresses (VPA) ending with @paytm. From March 1, this could move to holders associated with other banks.
To address this, Paytm plans to partner with three or more banks to issue new VPAs to its customers, with HDFC Bank, Axis Bank and Yes Bank as potential contenders. Paytm Payments Bank (PPBL) is also in discussions to transfer the node accounts of Paytm merchants to other lenders, pending detailed FAQs from the regulator.
This move aligns Paytm with other third-party payment apps such as PhonePe, Google Pay and Amazon Pay, among the 22 TPAPs running on UPI. Notably, competitors like PhonePe witnessed a 15-20 percent increase in their user base in the week after the RBI notice to Paytm, according to the report.
Challenges and Coordination
The change in payment addresses for customers is a back-end process, different from the front-end changes required for merchants. Coordination between banks, NPCI and Paytm is crucial for a smooth transition.*
One complication is that Paytm’s reliance on the technology backend of third-party lenders raises concerns about potential stress during high payment volumes.
Also despite efforts by Paytm founder-CEO Vijay Shekhar Sharma, including meetings with RBI officials and the finance minister, no extension or relaxation has been given as the matter remains a regulatory and enforcement matter under the control of the central bank.
The Paytm Saga so far…
Paytm founder-CEO Vijay Shekhar Sharma is facing a severe crisis as his brainchild and India’s beloved unicorn success story, PPBL navigates strict directives issued by the RBI. The directions are to stop further deposits, credit transactions and top-ups on customer accounts after February 29, raising concerns about the future viability of the bank.
According to the National Payments Corporation of India (NPCI), PPBL led UPI transactions in December, with Rs 283.5 crore received and Rs 41 crore sent. In the same month, the PPBL app recorded 144.25 crore transactions ₹16,569.49 crores.
The RBI has cracked the whip over irregularities in know-your-customer standards, compliance issues and related transactions. The crackdown stems from concerns about money laundering and questionable transactions involving crores of rupees. Non-KYC compliant accounts and cases of single PANs used for multiple accounts raised red flags.
According to a Reuters report, PPBL came under RBI scrutiny as hundreds of thousands of accounts were found to have been created without proper identification. The RBI has alerted the Enforcement Directorate (ED) and other government agencies regarding the irregularities in PPBL accounts.
Responding to the developments, Paytm’s founder-CEO reassured users about the app’s functionality beyond February 29. In a post on February 2, he appreciated the support and engagement of Paytm users, emphasizing the company’s dedication to serve the nation fully in line with focus. on payment innovation and financial inclusion.
In several statements, the company said the Paytm management is in ongoing discussions with the RBI to comply with directives.
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Published: 10 Feb 2024, 11:50 IST
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