RBI asks Paytm to reapply for payment aggregator licence; needs to comply with FDI guidelines

The Reserve Bank of India (RBI) has rejected digital payments and financial services Paytm’s application for a payment aggregator licence and asked for it to reapply within the next 120 days. One97 Communications’ subsidiary, Paytm Payments Services Limited (PPSL), had applied for a payments aggregator licence with the central bank. RBI has directed Paytm to “seek necessary approval for past downward investment from the company into PPSL, to comply with FDI guidelines”.

The central bank has also directed the payment firm not to onboard new online merchants.

The company said that the development has no material impact on its business and revenues since the communication from RBI is applicable only to onboarding of new online merchants.

Paytm reiterated that it can continue to onboard new offline merchants and offer them payment services including All-in-One QR, Soundbox, Card Machines, among others.
“Similarly, PPSL can continue to do business with existing online merchants for whom the services will remain unaffected. We are hopeful of receiving the necessary approvals in a timely manner and resubmitting the application,” Paytm added.

RBI had rejected Paytm’s rival MobiKwik PA licence application, post which Mobikwik reapplied.

In March,
RBI had barred Paytm Payments Bank from onboarding new customers. “Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by the Reserve Bank of India (RBI) after reviewing (the) report of the IT auditors,” the central bank said in a statement in March.

The ban continues to be in place. In fact, in its
September quarterly earnings, Paytm said it still does not have a firm timeline on when it expects the banking regulator to allow it from opening new Payments bank accounts.

The
RBI had in March 2020 released its payment aggregator framework which stated that all payment gateways are required to obtain a licence to onboard merchants, and offer them payments services.

So far at least 185 fintech firms including big names such as Cred, Razorpay, and PhonePe have submitted proposals seeking the licence.

Over the past several months, the RBI has been holding presentations with payment gateway providers and other fintech firms that have applied for the licence. However, it has been strict in its evaluation of these applications, sources earlier told ET.

Paytm’s stock has hit an all-time low having slumped to Rs 465, down more than 70% from its listing price a year ago. Reliance’s Jio Financial Services “can pose a significant growth and market-share risk” for players such as Paytm and Bajaj Finance Ltd, Macquarie analysts led by Suresh Ganapathy wrote in a note earlier this week.

In May, a
report from Macquarie had set a target price of Rs 450 per share. Paytm’s IPO issue price was Rs 2,150 per share when it listed in November last year.

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