The Reserve Bank of India (RBI) has refused to grant Paytm Payments Services (PPSL) a payment aggregator license, the business said on November 26 to the stock exchanges. The subsidiary of the fintech firm had requested authorization to provide payment aggregator (PA) services to online retailers. 

Paytm is the only major payment gateway player to have got this rejection by the authority. The authority has given in-principle approval to incumbents such as Razorpay, Pine Labs, Cashfree, and CCAvenues. While BillDesk and PayU are still waiting for a response.


The RBI rejected Mobikwik’s application for a PA license in April, giving banks 180 days to discontinue interacting with the company. In October, the company applied again. According to sources, the corporation has already renewed the license.

Meanwhile, Paytm answered that its application was “not rejected.” According to a firm spokeswoman, RBI has not rejected our application but has simply urged us to reapply in 120 days. We are taking the necessary efforts and hope to receive the appropriate clearances soon.

According to the central bank, PPSL must resubmit its PA application within 120 calendar days. Other actions include requesting approval for previous downward investments from Paytm into PPSL in order to conform with the government’s foreign direct investment (FDI) standards, as well as not onboarding new online merchants.

RBI Notification

In its letter, the RBI offered no other “material observations,” according to the business. This has no meaningful impact on our business or revenues because the RBI notification solely applies to the onboarding of new online merchants. According to the statement, we may continue to onboard additional offline merchants. Also continue to provide them payment services such as all-in-one QR, Soundbox, and card machines.

This setback for Paytm comes at a time when competition in the payments market is heating up, with more offline firms searching for an online play to offer omnichannel payment services to retailers and established players expanding their capabilities.

PhonePe, a Paytm competitor, is also developing its own payment gateway while waiting for the RBI to approve its license. MSwipe, a POS player, is also venturing into online payments. It has received in-principle permission for the license in August of this year.

This is also Paytm’s second setback from the regulator. Following the RBI’s directive in March to cease onboarding new clients on Paytm Payments Bank. The prohibition is still in place. Paytm Payments Bank’s management has received an RBI-mandated IT auditors report as well as the central bank’s observation on it.

What exactly is a payment aggregator?

A payment aggregator accepts payment instruments from customers and provides payment services to merchants and e-commerce sites. As part of this, they pool client payments and transfer them to merchants after a set period of time.

The services include providing integrated payment methods such as cash and cheque transactions, as well as online and offline contact points, as well as allowing merchants to make bank transfers without the need to open accounts directly with the bank.

License requirement

The RBI ordered that all PAs be authorized by it in a new set of guidelines announced in March 2020. In order to do so, the regulator instructed non-bank entities that provide PA services to apply for authorization by June 30, 2021, which was eventually moved back to September 30, 2021.

The decision to give the license came after a time of reviewing the applications. The regulations required all payment gateways to obtain a license in order to operate. The RBI would directly supervise the few organizations having the authorization to operate as payment aggregators in India. More than 185 fintech companies and start-ups had applied for a PA license.

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