After reporting Rs 930 crore profit, Paytm gets NPCI's approval to onboard new UPI users

Fintech major Paytm, owned by One97 Communications, has received approval from the National Payments Corporation of India (NPCI) to onboard new users on its Unified Payments Interface (UPI) platform.

This comes after nearly nine months of restrictions imposed by the Reserve Bank of India (RBI) earlier this year, which halted the company's ability to add new customers.

NPCI's approval came after the company's request, initially submitted on August 1, 2024, was reviewed and approved. The approval allows Paytm to resume expanding its user base on the UPI platform.

Relief after RBI's restrictions

The RBI's restrictions on Paytm were put in place due to concerns over non-compliance and material supervisory issues related to Paytm Payments Bank Limited (PPBL), an associate of One97 Communications.

In January 2024, the RBI directed Paytm Payments Bank to stop onboarding new customers for UPI, halting the company's growth in this segment.

The restrictions affected Paytm’s ability to expand its UPI transaction volumes, though the company was permitted to continue UPI transactions through existing partnerships with major banks like SBI, Axis Bank, HDFC Bank, and Yes Bank.

Compliance requirements for Paytm

The NPCI's approval for Paytm to onboard new UPI users comes with strict conditions. Paytm is required to comply with various guidelines, including risk management protocols, multi-bank arrangements, and data protection standards as outlined by the NPCI.

The company is also obligated to adhere to the Payment and Settlement Act of 2007, Information Technology Act of 2000, and the Digital Personal Data Protection Act of 2023.

Additionally, Paytm must follow NPCI's circular on Storage of Payment System Data issued in 2018 to ensure customer data protection and security.

Impact on Paytm's business

The approval to onboard new UPI users is expected to significantly boost Paytm's transaction volumes on the platform.

As of September 2024, Paytm was the third-largest UPI payments platform, trailing behind Bengaluru-based PhonePe and Google Pay, processing over 1 billion transactions monthly. 

This development comes as a major relief for the fintech firm, which has been working to regain lost ground since the RBI's restrictions. With this approval, Paytm can once again focus on expanding its UPI user base, a key driver of growth for the company.

Paytm's financial performance

The approval came shortly after Paytm's parent company, One97 Communications, reported a consolidated profit after tax (PAT) of Rs 930 crore for the quarter ending in September 2024.

However, the profit is largely attributed to a one-time gain from the sale of its entertainment ticketing business to Deepinder Goyal-led Zomato. Excluding this one-off transaction, Paytm remains a loss-making entity in the public markets.

Paytm's revenue for the quarter fell 34% year-on-year (YoY) to Rs 1,659 crore, down from Rs 2,519 crore in the corresponding quarter of the previous year.