One97 Communications, the parent company of Paytm, has confirmed that its core operations, services, and financial health will not be impacted following the Reserve Bank of India's (RBI) decision to cancel the banking license of Paytm Payments Bank Limited (PPBL), an associate entity.
RBI Cites Regulatory Violations for License Revocation
The RBI officially revoked PPBL's banking license, citing a history of regulatory violations, including deficiencies in customer due diligence, non-compliance with KYC norms, issues with fund flows, and technology system inadequacies. This action follows earlier restrictions imposed by the central bank, which in January 2024 directed PPBL to halt fresh deposits, effectively ceasing its core operations. By March 2024, the bank was barred from accepting any new funds, initiating a run-down phase.
Paytm Payments Bank, which received its license in August 2015, was permitted to accept deposits but not to lend money. The RBI plans to approach the High Court to initiate the winding-up process for the bank.
Paytm's Strategic Shift Mitigates Impact
In a stock exchange filing, One97 Communications clarified that PPBL operates as a separate entity, with no direct financial or operational exposure from the parent company. Paytm had already fully impaired its investment in PPBL as of March 31, 2024.
The company emphasized that its key offerings, including the Paytm app, UPI services, QR payments, Soundbox, card machines, payment gateway, and other merchant solutions, will continue to operate without interruption. This continuity is largely due to Paytm's proactive transition to a third-party payments framework. Following initial regulatory restrictions in early 2024, critical operations such as UPI and merchant settlements were moved to partner banks.
Under this new structure, Paytm functions as a third-party application provider (TPAP), routing its UPI services through a multi-bank arrangement, notably led by Yes Bank. The company has also secured necessary regulatory approvals, including onboarding new UPI users and obtaining a payment aggregator license, further solidifying its payments ecosystem independently of the bank.
The license cancellation formalizes the closure of an entity that had already become operationally inactive, with minimal implications for Paytm’s ongoing business and user services.