Ensuring a Seamless Transition: Regulatory Measures for Paytm Payments Bank

Ensuring a Seamless Transition: Regulatory Measures for Paytm Payments Bank

The Reserve Bank of India (RBI) has recently taken noteworthy regulatory actions, leveraging its authority under section 35A of the Banking Regulation Act, 1949, against Paytm Payments Bank. These measures, communicated through press releases on March 11, 2022, January 31, and February 16, 2024, impose business restrictions on the bank. In response, the RBI has introduced a set of measures aimed at safeguarding digital payments and mitigating concentration risk in the Unified Payments Interface (UPI) system.

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Effective March 15, 2024, Paytm Payments Bank will no longer accept additional credits into customer accounts and wallets. To facilitate uninterrupted digital payments, the RBI has advised the National Payments Corporation of India (NPCI) to evaluate One97 Communication Ltd (OCL) as a Third-Party Application Provider (TPAP) for the UPI channel. If approved, the migration of ‘@paytm’ handles will occur seamlessly from Paytm Payments Bank to a new set of identified banks, preventing any service disruptions.

Furthermore, NPCI may certify 4-5 banks as Payment Service Provider (PSP) Banks, ensuring their capacity to handle high-volume UPI transactions. This aligns with NPCI norms to minimize concentration risk in the UPI system. Merchants using PayTM QR Codes are encouraged to open settlement accounts with PSP Banks other than Paytm Payments Bank.

It is crucial to note that the migration of ‘@paytm’ handles applies exclusively to customers and merchants using this UPI handle. For those with UPI addresses or handles other than ‘@Paytm,’ no action is required. Customers with underlying accounts or wallets in Paytm Payments Bank are advised to make alternative arrangements with other banks well before March 15, 2024, as detailed in the RBI’s FAQs released on February 16, 2024.

FASTag and National Common Mobility Card (NCMC) holders issued by Paytm Payments Bank are urged to make alternative arrangements before the specified date to prevent any inconvenience. These regulatory measures are implemented solely to protect customers and the payment system from potential disruptions, emphasizing their significance without prejudice to the regulatory or supervisory actions initiated by the RBI against Paytm Payments Bank.

In conclusion, the RBI’s proactive approach seeks to ensure a smooth transition, maintaining the integrity of digital payments and safeguarding the interests of users in the evolving landscape of financial services.

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