One97 Communications, the parent company of Paytm, has taken a significant step towards re-entering the digital wallet business by applying for a Prepaid Payment Instrument (PPI) license. This development, disclosed in the company's June quarter investor presentation, follows the Reserve Bank of India's (RBI) cancellation of Paytm Payments Bank's license earlier in April 2026.
A PPI license, issued by the RBI, authorizes entities to issue and operate prepaid payment instruments, including digital wallets. These instruments allow users to load funds in advance and utilize the stored value for various transactions such as online and offline purchases, utility bill payments, and fund transfers, all without directly using a traditional bank account.
If approved, the new license would enable Paytm to offer wallet services directly through its wholly-owned subsidiary, Paytm Payments Services Ltd (PPSL). This independence would reduce its reliance on external banking partners for such products, marking a crucial milestone in Paytm's efforts to rebuild and restore its payments ecosystem.
The regulatory action against Paytm Payments Bank stemmed from several years of RBI scrutiny over compliance and governance issues. After imposing restrictions on onboarding new customers and other supervisory measures, the central bank ultimately revoked the bank's license, citing persistent violations of licensing conditions and regulatory requirements. The RBI had clarified that the bank maintained sufficient liquidity to repay depositors during the winding-up process.
Following the cancellation, Paytm pivoted its focus to maintaining uninterrupted UPI services by forging partnerships with multiple banks. While customers and merchants continued to use UPI seamlessly, the absence of its proprietary wallet offering created a notable gap in its consumer payments portfolio. The wallet business was historically one of Paytm's foundational strengths, crucial for building its extensive user base before diversifying into merchant acquiring and financial services.
Over the past year, Paytm has actively reconstructed much of its payments infrastructure. This includes transferring its offline merchant acquiring business to PPSL and strengthening collaborations with various banking institutions. A fresh PPI license would allow Paytm to reintroduce a key payment product and further diminish its dependence on external banking partners for wallet-related services.
This move is expected to bolster Paytm's standing in India's highly competitive digital payments market. Although UPI continues to dominate, digital wallets retain significant relevance for specific consumer use cases and preferences.
The application for the PPI license coincides with an improvement in Paytm's financial performance. For the quarter ended June 30, the company reported a substantial 79% year-on-year increase in net profit, reaching ₹220 crore. Revenue from operations also saw a healthy rise of 28% to ₹2,448 crore, primarily driven by growth in merchant payments and financial services.
Should the RBI grant the application, Paytm would be positioned to relaunch its digital wallet, providing consumers with an additional payment option alongside UPI, deepening user engagement within its application, strengthening its merchant payments ecosystem, and further diversifying its comprehensive digital payments business.