Banking regulator RBI has put a pause on onboarding of online merchants by Paytm Payments Services, even as the company said it will have no material impact on its business, according to a regulatory filing.
In order to comply with the Reserve Bank of India's (RBI) payment aggregator (PA) guidelines, One97 Communications (OCL), the company that owns the Paytm brand, proposed to transfer the payment aggregator services business it had been engaged in to Paytm Payments Services (PPSL) in December 2020. However, the banking regulator had rejected its application.
The company had re-submitted the required documents in September 2021.
Paytm said PPSL has now received a letter from RBI in response to an application for the authorisation to provide PA services for online merchants.
As per the letter, PPSL is required to "Seek necessary approval for past downward investment from the company into PPSL, to comply with FDI Guidelines" and "not onboard new online merchants".
Paytm, in the regulatory filing, said it can resubmit the PA application within 120 calendar days.
The company will not onboard new online merchants till the time approvals remain pending.
PAs are entities that facilitate e-commerce sites and merchants to accept various payment instruments from customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own.
According to RBI's PAs guidelines, a single entity cannot continue to provide an e-commerce marketplace along with payment aggregator services and such payment aggregator services must be separated from the e-commerce marketplace business.
Paytm further said there were no material observations from RBI and the move has no material impact on its business and revenues since the communication from the central bank is applicable only to onboarding of new online merchants.
"We can continue to onboard new offline merchants and offer them payment services including All-in-One QR, Soundbox, Card Machines, etc. 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 said.
With inputs from Agencies.