Charles Esther
Indian fintech leader Paytm has finally received long-sought approval from the Reserve Bank of India (RBI) to operate as a payment services provider for online merchants.
The breakthrough comes just days after one of its major Chinese investors exited the company, marking a significant turning point following months of regulatory challenges and close scrutiny.
In-Principle License Granted After Two-Year Wait
On Tuesday, the RBI granted “in-principle” approval to Paytm Payments Services to function as an online payment aggregator.
Parent company One97 Communications revealed the news in a filing to the Indian stock exchanges, noting that the nod came more than two years after its initial license request was rejected in November 2022.
The earlier denial was tied to non-compliance with rules governing foreign investments from countries sharing a land border with India.
Merchant Onboarding Restrictions Lifted
Without the license, Paytm was barred from adding new online merchants, though it maintained at the time that the impact on business and revenue was minimal.
The new approval removes the onboarding ban, allowing Paytm to once again enable merchants to accept payments through cards, net banking, and the government-backed Unified Payments Interface (UPI).
Recovery After Previous RBI Actions
The approval comes more than a year after the RBI prohibited Paytm Payments Bank from accepting fresh deposits and processing credit transactions.
Paytm responded by quickly partnering with Axis Bank, HDFC Bank, State Bank of India, and Yes Bank to handle transactions for its users and merchants.
Timing Coincides With Chinese Investor Exit
The green light from the RBI follows closely on the heels of China’s Ant Group selling its remaining 5.8% stake in One97 Communications for $454 million via block deals.
This comes after a prior exit in 2023, when Ant Financial sold a 10.3% stake worth $628 million to founder and CEO Vijay Shekhar Sharma in a no-cash deal.
Compliance Conditions Attached
As part of the approval, Paytm must complete a full system and cybersecurity audit within six months and submit the report to the RBI.
If the company fails to do so, the approval will lapse. The license is strictly limited to online payment services.
Boost to Value Chain Control
With this license, Paytm can control more of its value chain — from offline payment hardware such as sound boxes to its online payment gateway — reducing dependency on banking partners, according to fintech investor Osborne Saldanha.
UPI Market Position
Paytm is currently India’s third-largest UPI payments player, behind PhonePe and Google Pay.
In June, it processed 1.27 billion UPI transactions worth ₹1.34 trillion ($15 billion), accounting for 6.9% of total transactions and 5.6% of transaction value.
Financial Performance Strengthens
For the first quarter of FY2026 ending in June, Paytm reported a net profit of ₹1.23 billion ($14 million), reversing a loss from the same period last year.
Revenue rose 28% year-over-year to $224 million, and its contribution margin improved to 60% from 50%.
Share Price Gains Amid Renewed Confidence
Paytm’s stock has climbed 13.25% so far in 2025, reflecting improving investor confidence.
The shares closed at ₹1,118.50 ($13) on Wednesday, just ahead of the RBI’s approval announcement.
David Awoyode