Indian fintech giant Paytm has received much-anticipated approval from the country's central bank to operate as an online merchant payment service provider to mark a significant regulatory breakthrough after months of set-off and scrutiny days after one of the Chinese investors sold the entire stock.
On Tuesday, the Reserve Bank of India (RBI) granted “principles” approval to Paytm's payment services unit to operate as an online payment aggregator, parent company One97 Communications said in a filing with the Indian Stock Exchange (PDF). The approval comes more than two years after the license was first rejected in November 2022, as Noida-based Fintech has not violated India's rules to receive investments from countries that share land borders.
Without a license, PayTM was banned from hiring new online merchants. At the time, the company said the restrictions “have no material impact” on the business or revenue. However, at the annual meeting last September, Vijay Shekhar Sharma, founder and CEO of One97 Communications, stated that he would like to reapply for his payment aggregator license.
It also receives approval a year after RBI bans Paytm Payments Bank accepting fresh deposits and enabling margin transactions. Paytm has quickly shifted gears and overcome its impact by partnering with Axis, HDFC, Indian state banks and Yes Bank, making it a payment system provider for consumers and merchants involved in online transactions and Autopay Mandates.
With the new license, PAYTM operates as a service provider for online merchants and can accept a variety of payment methods, including cards, net banking, and the government-supported unified payment interface (UPI). The approval will also lift the online merchant onboarding restrictions imposed by the central bank in 2022.
The approval comes just a week after the Chinese Ali Group terminated Paytm by selling the remaining 5.8% direct stake on ONE97 newsletter for $454 million through a Block transaction. This follows an earlier exit in 2023 when ANT Financial sold its 10.3% stake (valued by $628 million) to Sharma in a No-Cash transaction.
PAYTM must undertake a “systems audit” including a cybersecurity review and submit its report to the Reserve Bank of India within six months. If you do not do so, your approval will expire in accordance with the RBI letter enclosed with the company's stock exchange application. Licenses are also limited to online payment services and have not been extended beyond that scope.
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The latest developments will help control a large portion of the value chain, from offline sound boxes to online payment gateways, and reduce reliance on other bank partners, FinTech investor Osborne Sardin told TechCrunch.
Paytm is currently the third most used UPI Payments platform, after Phonepe and Google Pay, owned by Walmart. Fintech accounted for 6.9% of the total UPI transactions of 18.4 billion in June and 5.6% of the transaction value, according to the Indian National Payment Corporation (NPCI). In total, PAYTM processed 1.27 billion UPI transactions worth £1.34 trillion (approximately $15 billion).
Paytm continues to pay for Phonepe and Google in the UPI market, but in June the duo, which handles more than 82% of all UPI transactions, offers a wide range of businesses and services to attract both consumers and merchants. These include offline merchant payment solutions with integrated hardware, software and a layer of service, as well as the growing credit and lending business.
Paytm reported net profit of 1.23 billion (approximately $14 million) in the first quarter of 2026. This will end in June. The results beat expectations as analysts predicted a loss of £1.27 billion (approximately $14.5 million). Revenues rose to $224 million from the previous year, but the company's contribution margin rose to 60% from 50% the previous year.
In addition to recent financial growth, Paytm shares rose 13.25% from the start of the year in 2025, indicating that the company is beginning to regain market confidence after more than a year of regulatory recession. The shares closed at 1,118.50 (approximately $13) on Wednesday, just before regulatory approvals were announced.