Paytm Secures Long-Awaited RBI Approval for Online Merchant Payments: Marks Key Regulatory Breakthrough Amidst Chinese Investor Exit and UPI Market Growth
India’s fintech giant One97 Communications, parent company to Paytm, has secured a significant regulatory milestone from the Reserve Bank of India (RBI). The RBI granted “in-principle” approval for Paytm’s Payment Services unit to operate as an online payment aggregator.
The approval, announced in a filing to Indian stock exchanges on Tuesday, comes more than two years after the initial denial of the license due to noncompliance with India’s rules regarding investments from countries sharing a land border. Without this license, Paytm was prevented from onboarding new online merchants.
This development marks a key breakthrough following months of setbacks and scrutiny, particularly significant given the recent exit of one of its Chinese investors. China’s Ant Group sold its entire stake in One97 Communications just days prior to this approval.
The RBI ban on Paytm Payments Bank from accepting fresh deposits and enabling credit transactions was lifted over a year ago, with Paytm swiftly partnering with Axis, HDFC, State Bank of India, and Yes Bank to serve as payment system providers for its consumers and merchants involved in online transactions and autopay mandates.
With the new license, Paytm can now offer online merchants a variety of payment methods such as cards, net banking, and the Indian government-backed Unified Payments Interface (UPI). The approval also removes the online merchant onboarding restrictions imposed by the central bank in 2022.
The approval arrives a week after Ant Group exited Paytm by selling its remaining 5.8% direct stake for $454 million through block deals. This follows an earlier exit in 2023, when Ant Financial sold a 10.3% stake – worth $628 million – to Vijay Shekhar Sharma, founder and CEO of One97 Communications, in a no-cash deal.
Paytm is now obligated to undergo a “system audit,” including a cybersecurity review, and submit its report to the RBI within six months. Failure to do so will result in the approval being revoked. The license only extends to online payment services and does not encompass other areas of operation.
This latest development positions Paytm to control most of its value chain, from offline sound boxes to the online payment gateway, while reducing its reliance on other bank partners. Fintech investor Osborne Saldanha told media outlets that this approval will significantly strengthen Paytm’s position in the market.
Paytm currently ranks as the third most-used UPI payments platform behind Walmart-owned PhonePe and Google Pay. The fintech accounted for 6.9% of the total 18.4 billion UPI transactions in June and 5.6% of the transaction value, according to the National Payments Corporation of India (NPCI). In total, Paytm processed 1.27 billion UPI transactions worth ₹1.34 trillion (approximately $15 billion) during this period.
While trailing PhonePe and Google Pay in the UPI market – handling over 82% of all UPI transactions in June – Paytm offers a diverse range of business and service solutions to attract both consumers and merchants. These include offline merchant payment solutions with integrated hardware, software, and service layers, as well as a growing credit and lending business.
For the first quarter of its financial year 2026, ending in June, Paytm reported net income of ₹1.23 billion (approximately $14 million), marking a turnaround from a loss during the same period last year. The results surpassed expectations, as analysts had predicted a loss of ₹1.27 billion (approximately $14.5 million). Revenue grew by 28% year-over-year to $224 million, while the company’s contribution margin improved to 60%, up from 50% a year ago.
Paytm’s shares have shown positive growth this year, with a 13.25% increase since the beginning of 2025. The stock closed at ₹1,118.50 (approximately $13) on Wednesday, just before the regulatory approval was announced.
