RBI Urges NPCI to Review Paytm’s Request for TPAP Amid Upcoming Closure of Paytm Payments Bank

Ananya Shroff
3 Min Read

The Reserve Bank of India (RBI) has instructed the National Payment Council of India (NPCI) to evaluate One97 Communications’ (OCL), the owner of Paytm, request to become a Third-Party Application Provider (TPAP) for the continuous operation of Unified Payments Interface (UPI) services on the Paytm application. This comes in light of RBI’s directive to shut down Paytm Payments Bank Limited (PPBL) operations by March 15, 2024.

A TPAP approval is essential for providing UPI-based payment transactions to users. Currently, all UPI transactions on the Paytm app are routed through PPBL, a subsidiary of OCL, registered as TPAP.

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With the impending closure of PPBL, the Paytm app requires TPAP registration to offer UPI payment services. The RBI’s move aims to facilitate the continuation of digital payments for UPI customers using ‘@paytm’ handle operated by PPBL.

What is a TPAP?

A Third-Party Application Provider is an entity offering UPI-compliant applications to end-users, facilitating UPI-based payment transactions. These applications may include mobile wallets, merchant apps, or any platform utilizing UPI for payments. NPCI owns and operates the UPI platform, and TPAPs leverage this infrastructure in collaboration with payment service providers and banks.

RBI’s Directives and Implications

The RBI, last month, prohibited PPBL from accepting deposits or top-ups after February 29, 2024, due to persistent non-compliances. This deadline was extended to March 15. To ensure seamless digital payments, the RBI directed NPCI to assess OCL’s request to become a TPAP for the UPI channel, allowing the continued operation of the Paytm app.

If NPCI grants TPAP status to OCL, ‘@paytm’ handles will be seamlessly migrated from PPBL to a set of newly identified banks to avoid disruptions. OCL won’t be allowed to add new users until existing users are successfully migrated. NPCI may certify 4-5 banks for PSP (Payment Service Provider) status to process high-volume UPI transactions for a diversified UPI system. This aligns with NPCI regulations mandating large TPAPs to participate in UPI through a multibank model.

How Many TPAPs Exist?

Presently, there are 22 NPCI-approved Third-Party Unified Payments Interface (UPI) apps, including Amazon Pay, Google Pay, PhonePe, and others, enabling users to send and receive money using UPI IDs.

The outcome of NPCI’s evaluation will significantly impact the future of Paytm’s UPI-based services, determining whether it can continue operations seamlessly or face disruptions due to the closure of PPBL.

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