Paytm Payments Services Limited (PPSL), a wholly owned subsidiary of One97 Communications, has received in-principle authorisation from the Reserve Bank of India to establish and operate a payment system for prepaid payment instruments (PPIs).
The approval marks a regulatory step forward for Paytm's payments business, although the subsidiary cannot begin issuing prepaid instruments until it secures final authorisation.
One97 Communications disclosed the development in a stock exchange filing on Friday. The RBI's letter, dated November 13, grants PPSL permission under the Payment and Settlement Systems Act, 2007, to set up and operate a payment system for PPIs, subject to compliance with the central bank's Master Directions.
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PPIs are payment instruments that allow users to store money and make transactions. Digital wallets, prepaid cards and certain gift cards fall within this category. The authorisation could help PPSL expand its regulated payments offerings once it completes the remaining compliance requirements.
However, the RBI has attached conditions to the approval. PPSL must conduct a system audit, including a cybersecurity audit, through a CERT-In empanelled auditor or a qualified information systems auditor. The audit must follow the RBI's prescribed cybersecurity and digital payment security controls.
The company must submit the system audit report to the RBI within six months of the authorisation letter. Failure to meet this deadline will result in the in-principle approval lapsing automatically. The central bank has also clarified that PPSL can issue prepaid payment instruments only after receiving final authorisation.
The development follows PPSL's earlier application for a wallet licence, which Paytm had disclosed in its Q1 FY27 earnings release.
For Paytm, the approval represents progress towards strengthening its payments infrastructure. However, the next crucial milestone remains the RBI's final authorisation, without which the subsidiary cannot launch its PPI issuance operations.
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