The Reserve Bank of India (RBI) has given initial approval to Paytm Payments Services (PPSL), a fully-owned arm of One 97 Communications Ltd (Paytm), to work as an online payment aggregator.
This move, under the Payment and Settlement Systems Act, 2007, ends almost three years of regulatory uncertainty for the company.
This approval is a major relief for Paytm after nearly three years of regulatory uncertainty and will allow the company to resume onboarding merchants and expand its digital payments network.
The RBI communicated the decision in a letter dated August 12, 2025, which Paytm disclosed through its stock exchange filings.
Paytm Share Price Hits 52-Week High
The announcement had an immediate impact on the stock market. Shares of One 97 Communications surged over 5%, touching a new 52-week high of ₹1,187 on the NSE on August 13, 2025.
Investors welcomed the development, seeing it as a sign of regulatory stability returning to Paytm’s business. The positive sentiment reflects expectations that merchant onboarding and payment processing revenues will now grow steadily.
Conditional Approval From RBI
While the in-principle authorisation is a positive step, it comes with conditions. The RBI’s approval applies only to online payment aggregator operations as defined under the Guidelines on Regulation of Payment Aggregators and Payment Gateways issued in March 2021.
The letter clearly states that any transactions outside this scope — such as merchant “pay-out transactions” — should not be routed through the escrow account designated for payment aggregator operations.
PPSL will also need to undergo a comprehensive system audit before the final authorisation is granted.
Source: Moneycontrol
System Audit and Compliance Requirements
The RBI has instructed PPSL to conduct:
- A full system audit, including a cybersecurity audit.
- The audit must be performed by a CERT-In empanelled auditor or a qualified Certified Information Systems Auditor (CISA) or DISA-certified professional.
- The scope must cover compliance with RBI’s Master Direction on Cyber Resilience and Digital Payment Security Controls for Non-Bank Payment System Operators and RBI’s circular on Storage of Payment System Data.
The audit report must be submitted to the RBI within six months from the date of the approval letter. Failure to do so will cause the in-principle authorisation to lapse automatically.
Additionally, PPSL must seek prior approval from the RBI for any future changes in shareholding or ownership.
Source: Economic Times
Ban on Merchant Onboarding Lifted
One of the most significant outcomes of this approval is the withdrawal of merchant onboarding restrictions that were imposed on PPSL since November 2022.
Back in November 2022, the RBI had rejected Paytm’s payment aggregator licence application due to non-compliance with foreign direct investment (FDI) norms. Along with the rejection, the regulator prohibited PPSL from onboarding new merchants.
With the new in-principle approval, these restrictions have now been lifted, allowing Paytm to actively expand its merchant base once again.
Paytm’s Financial Turnaround
The regulatory approval comes at a time when Paytm is showing a strong financial recovery.
In Q1FY26 (April–June 2025), Paytm reported a consolidated net profit of ₹123 crore, a sharp turnaround from a ₹839 crore loss in the same quarter last year.
This was the company’s first operationally-driven quarterly net profit since listing on the stock exchange.
Source: Moneycontrol
Overcoming Past Challenges
Paytm’s road to recovery has not been easy.
In January 2024, the RBI imposed restrictions on Paytm Payments Bank, which caused a significant drop in revenue over the next six months.
In response, the company implemented several measures to stabilise operations:
- Tight control over operating expenses.
- Selling non-core assets such as Paytm Insider.
- Resetting the merchant lending business.
These steps have helped Paytm gradually rebuild investor confidence.
Ant Financial’s Exit and Ownership Changes
In another major development, Chinese fintech giant Ant Financial has fully exited Paytm.
The company sold its remaining 5.84% stake for about ₹3,800 crore through block deals. With this sale, Chinese ownership in Paytm is now zero, marking a significant shift in the shareholding structure.
This change could help reduce geopolitical concerns around Chinese investment in Indian fintech firms and further improve regulatory comfort.
Source: Moneycontrol
Strong Revenue and Profit Growth
Paytm’s operating performance in Q1FY26 shows clear signs of growth:
- Operating revenue rose 28% year-on-year to ₹1,918 crore.
- Contribution profit jumped 52% year-on-year to ₹1,151 crore.
- Contribution margin improved to 60%.
Source: Moneycontrol
What the RBI Approval Means for Paytm
The RBI’s in-principle approval is not just a regulatory clearance — it represents a fresh opportunity for Paytm to scale its payment aggregation services.
Key implications include:
- Merchant Base Expansion – With the onboarding ban lifted, Paytm can now sign up new merchants, boosting payment volumes.
- Revenue Growth Potential – More merchants mean higher transaction processing fees, improving payment services revenue.
- Investor Confidence – Regulatory clarity often reduces risk perception among investors, which may support the share price.
- Compliance Strengthening – Meeting RBI’s audit and cybersecurity requirements will enhance operational resilience.
The Road Ahead
While the in-principle licence is a major win, Paytm still needs to:
- Successfully complete the system and cybersecurity audits within the RBI’s six-month deadline.
- Ensure strict compliance with all Payment Aggregator guidelines.
- Continue improving profitability while investing in technology infrastructure.
If these conditions are met, Paytm will be well-positioned to secure the final RBI authorisation and expand its market share in India’s competitive digital payments space.
Industry Context
The payment aggregator (PA) framework was introduced by the RBI to regulate entities that facilitate online payments for merchants without directly handling funds.
To operate legally, companies like Paytm must:
- Maintain escrow accounts for settlement.
- Comply with strict data storage and cybersecurity rules.
- Undergo periodic audits.
The RBI has been particularly strict with licensing in recent years, which makes Paytm’s approval significant for the fintech industry.
Market Outlook
With strong financial performance, renewed regulatory approval, and a clean ownership structure, Paytm seems to be on a positive growth trajectory.
The share price momentum seen after the RBI’s announcement suggests that the market is optimistic about Paytm’s ability to regain lost ground.
However, sustained growth will depend on:
- Maintaining compliance.
- Expanding merchant and user base.
- Innovating payment solutions to stay ahead of competitors like PhonePe, Google Pay, and Razorpay.
Conclusion
The RBI’s in-principle authorisation for Paytm Payments Services to operate as an online payment aggregator is a turning point in Paytm’s journey.
It ends a long phase of regulatory uncertainty, allows merchant onboarding to resume, and aligns with the company’s broader recovery strategy.
If it successfully completes the RBI’s audit requirements and secures the final licence, this could mark the beginning of a new growth chapter for one of India’s most recognisable fintech brands.
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Yash Vora is a financial writer with the Informed InvestoRR team at Equentis. He has followed the stock markets right from his early college days. So, Yash has a keen eye for the big market movers. His clear and crisp writeups offer sharp insights on market moving stocks, fund flows, economic data and IPOs. When not looking at stocks, Yash loves a game of table tennis or chess.
