RBI directs NPCI to assess Paytm’s TPAP request

  • The Reserve Bank of India (RBI) has directed the National Payment Council of India (NPCI) to consider One97 Communications’ (OCL’s) request to become a Third-Party Application Provider (TPAP) for the Paytm application’s Unified Payments Interface (UPI) operations.

Understanding the TPAP role: 

  • TPAPs support UPI-based transactions by providing end users with compliant applications that conform to security protocols and regulatory regulations.
  • Infrastructure: They use the NPCI’s UPI platform and interact with payment service providers (PSPs) and banks to ensure seamless transactions.

Implications of TPAP Approval

  • TPAP certification is crucial for Paytm to continue UPI-based transactions and provide uninterrupted service to clients.
  • Migration Process: If approved, Paytm’s ‘@paytm’ handles will seamlessly move to specified banks to avoid service disruptions, with OCL restricted from adding new users until the migration is complete.
  • Risk Mitigation: The RBI requires multiple banks to be certified as PSPs to manage high-volume UPI transactions, which reduces risk and improves system resilience.

Recent developments.

  • PPBL Closure: Following the RBI’s instruction to shut Paytm Payments Bank (PPBL) operations by March 15, 2024, Paytm’s current TPAP registration for UPI transactions is uncertain.
  • RBI Intervention: In reaction to PPBL’s anticipated shutdown, the RBI has entrusted NPCI with examining OCL’s request to maintain TPAP status, which is critical for Paytm’s UPI operations to continue.

Current Landscape

  • Currently, 22 NPCI-approved third-party UPI apps, including as Google Pay, PhonePe, and Whatsapp, enable peer-to-peer transactions using UPI IDs.
  • The RBI’s guidance emphasises the regulatory focus on preserving stability and security in India’s digital payments ecosystem.

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