One97 Communications Ltd.-operated Paytm has been granted approval to become a third-party application provider.
The National Payments Corporation of India has granted Paytm a TPAP license for UPI transactions.
"National Payments Corporation of India (NPCI) has today granted approval to One97 Communications Limited (OCL) to participate in UPI as a Third-Party Application Provider (TPAP) under multi-bank model," the statement said.
Under the model, Axis Bank, HDFC Bank, State Bank of India and Yes Bank will act as the payment service provider banks for Paytm. This essentially means that all the UPI transactions will now be done via these banks, which were previously done via Paytm Payments Bank.
As far as the merchant accounts go, Yes Bank will act as the merchant acquiring bank for One97 Communications.
With this, the @Paytm handle would also be redirected to Yes Bank.
"@Paytm handle shall be redirected to Yes Bank. This will enable existing users and merchants to continue to do UPI transactions and AutoPay mandates in a seamless and uninterrupted manner," the statement from NPCI said.
According to a person with direct knowledge of the matter, Yes Bank would complete merchants' KYC in a week or 10 days.
For this reason, the first right of refusal for onboarding Paytm's merchants stays with Yes Bank. The bank also plans to onboard all merchants after doing KYC digitally, via YES PAY.
NDTV Profit previously reported that One97 Communications Ltd. signed a deal to move its merchant accounts to Yes Bank. It also applied for a TPAP license from NPCI in collaboration with Yes Bank and Axis Bank Ltd.
Yes Bank is one of the largest banks in the UPI transaction space. It processed 34,198 crore of pay and 40,443 crore of receipt transactions just in the month of January, the highest among banks.
On Feb. 23, the Reserve Bank of India directed NPCI to ensure alterative arrangements using Paytm Payments Bank's UPI services. It asked the NPCI to examine Paytm's request to become a TPAP for its UPI channel.
In February, Paytm also shifted its nodal account to Axis Bank by opening an escrow account.
All these developments come in response to the RBI's stringent curbs on Paytm Payments Bank on Jan. 31, owing to supervisory and regulatory lapses. The payments bank cannot accept further credits into its customer accounts and wallets after March 15.