Paytm gets an extension from RBI for resubmission of the PA license application
On Sunday, Paytm Payments Services Limited (PPSL) reported that the Reserve Bank of India granted an extension to resubmit its payment aggregator (PA) license application.
- In correspondence, the Reserve Bank of India has granted permission for PPSL to sustain its online payment aggregation operations in the interim. At the same time, it seeks official authorization from the government for its prior investments from its parent company, One97 Communication, into PPSL as per the Foreign Direct Investment regulations.
- According to a statement released by the company on November 26, the RBI declined its application for a PA license. In response, the central bank instructed PPSL to resubmit the PA application within a 120-day period.
- Additional actions involved obtaining the appropriate authorization for previous investments made by Paytm into PPSL to adhere to the government’s regulations on foreign direct investment (FDI) and refraining from bringing in new digital vendors.
- In accordance with the correspondence received from the Reserve Bank of India (RBI), PPSL will have a period of fifteen days to submit their application for authorization to function as an online payment aggregator after securing the government’s approval. On the other hand, if the government makes a detrimental decision, immediate intimation to the RBI shall be given.
- While carrying out this procedure, PPSL can sustain its online payment aggregation activities for current allies while abstaining from acquiring fresh vendors.
- Last week, Paytm made public the release of its latest technology platform, constructed wholly using domestic technology, with the objective of bolstering the ‘Atmanirbhar Bharat’ campaign. The enhanced platform can process ten times the volume of transactions compared to its preceding version. This development is anticipated to make payments “superfast, secure, and seamless.”
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Why do we need a PA license?
Acquiring a Payments Aggregator (PA) license enables businesses to offer payment services for merchants, specifically those operating in the online or e-commerce sectors, by accepting customer payments.
This involves the collection of funds from customers, which are then consolidated by the PAs and later remitted to the respective merchants within a set timeframe.
In March 2020, the RBI released a guideline aimed at safeguarding the welfare of both citizens and businesses. As per the guideline, payment gateways are required to obtain a license to onboard merchants and offer digital payment acceptance solutions to them.
To obtain the “In-Principle authorization to act as a payment aggregator” and meet the RBI guidelines, a fintech company must demonstrate a net worth of at least Rs 15 crore by March 2021, followed by Rs 25 crore by March 2023 and maintain a net worth of at least Rs 25 crore at all times thereafter.
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Does no PA license mean no business?
The Reserve Bank of India has deemed the applications submitted by Paytm Payments Services Ltd, PayU Payments Pvt Ltd, Freecharge Payment Technologies Pvt Ltd, and Tapits Technologies Pvt Ltd ineligible.
That clearly does not mean that they can operate their business. Some payment aggregator says there might be some error in the application for which their application got rejected; the limitation for these fintech firm is that they can not take in new vendors into their business for any purpose.
Some also say that some companies don’t fully fill the criteria of having a net worth of Rs.15 crores.
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The Reserve Bank of India has included a provision in the list stating that companies whose applications are returned can re-apply within 120 days from the date of their return.
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