RBI Clears Paytm to Resume Merchant Onboarding, Ends 3-Year Uncertainty

Mumbai, August 13 — The Reserve Bank of India (RBI) has granted in-principle approval to Paytm Payments Services Limited (PPSL) to operate as an online payment aggregator, lifting a ban on new merchant onboarding that has been in place since late 2022.

Regulatory breakthrough after prior rejection

The RBI conveyed its approval via a letter dated August 12, 2025, later disclosed through stock exchange filings. This marks a sharp turnaround after the regulator rejected Paytm’s licence application in November 2022, citing non-compliance with foreign direct investment (FDI) norms and halting new merchant onboarding.

Under the latest authorisation, PPSL may provide only online payment aggregator (PA) services under the Payment and Settlement Systems Act, 2007. The approval explicitly excludes other payment activities and prohibits routing “payout transactions on behalf of merchants” through the escrow account used for PA operations.

Conditions tied to RBI approval

♦ PPSL must conduct a system and cyber-security audit and submit its findings to the RBI within six months.

♦ Failure to comply will cause the in-principle authorisation to lapse and prevent final approval.

♦ Any change in shareholding, acquisition of control, or transfer of payment system operations must receive prior RBI consent.

This green light now enables Paytm to restart merchant onboarding and expand its payments infrastructure, ending nearly three years of regulatory uncertainty.

Financial rebound boosts Paytm’s position

The RBI nod aligns with Paytm’s strongest financial performance to date. In Q1 FY 26 (April–June 2025), the company reported a net profit of ₹123 crore, a sharp turnaround from an ₹839 crore loss in the same period last year.

Key highlights of the quarter:

♦ Operating revenue: ₹1,918 crore (↑ 28% YoY)

♦ Contribution profit: ₹1,151 crore (↑ 52% YoY)

♦ Contribution margin: 60%

♦ Stock performance: sustained bullish trend

This was Paytm’s first operationally-driven net profit since its public listing. The recovery follows a turbulent phase starting in January 2024, when RBI restrictions on Paytm Payments Bank cut revenues sharply. The firm has since restructured operations, reduced expenses, exited non-core businesses such as Paytm Insider, and recalibrated its merchant lending portfolio.

Ownership reshuffle: Chinese exit complete

Adding to the momentum, Ant Financial, a Chinese fintech major, sold its remaining 5.84% stake for about ₹3,800 crore through block deals. This reduced Chinese ownership in Paytm to zero, reshaping the company’s shareholding profile and easing regulatory concerns around foreign investment.