Source: BS
Context:
One 97 Communications Ltd, parent company of Paytm, has approved the transfer of its offline merchant payments business to its wholly owned subsidiary, Paytm Payments Services Ltd (PPSL). The move is aimed at complying with the Reserve Bank of India’s (RBI) Master Directions on Regulation of Payment Aggregators (September 15, 2025).
RBI Norms for Payment Aggregators (PAs)
- RBI regulates Payment Aggregators under the Payment and Settlement Systems Act, 2007.
- Master Directions on Regulation of Payment Aggregators and Payment Gateways (issued 15 September 2025) define the rules.
- Purpose: Ensure financial stability, customer protection, and operational integrity of digital payment systems.
Key Requirements for Payment Aggregators
- Separate Entity Requirement
- All payment aggregation activities must be housed in a single regulated entity.
- Objective: Avoid commingling of funds, improve oversight, and strengthen risk management.
- Capital Requirements
- Minimum net worth for a Payment Aggregator is ₹15 crore (for entities handling card/UPI/BBPS transactions).
- Trust and Escrow Accounts
- Customer funds must be held in a separate escrow account with a scheduled commercial bank.
- PAs cannot use customer funds for operational expenses.
- Customer Protection Measures
- Funds must reach merchants within T+1 day for domestic transactions.
- Grievance redressal mechanism must be in place.
- Operational & IT Security Standards
- Data localization: All payment data must be stored in India.
- Regular cybersecurity audits and IT risk management frameworks required.
- Compliance with RBI circulars on security controls and PCI DSS standards.
- Reporting & Audit
- PAs must submit periodic reports to RBI on transaction volumes, merchant onboarding, complaints, and frauds.
- Annual statutory audit and certification by auditors on adherence to norms.
- Board & Governance Norms
- Board-approved risk management and compliance policies.
- Independent directors to oversee operational and regulatory compliance.
- Restriction on Fund Usage
- PAs are not allowed to lend, invest, or offer deposit-like services using merchant or customer funds.
- Certification & Licensing
- Must obtain in-principle approval from RBI to operate as a Payment Aggregator.
- Only then can the entity collect payments on behalf of merchants.
Implications for Paytm
- Transferring offline merchant payments to PPSL, a wholly owned subsidiary, ensures:
- All merchant payment activities under one regulated entity.
- Compliance with RBI’s norms on fund segregation, risk management, and reporting.
- Strengthened corporate governance and operational oversight.
