In this article, we will delve into the Reserve Bank of India’s (RBI) decision to grant in-principle authorisation to Paytm Payments Services Limited (PPSL) for operating as an online payment aggregator (PA) under the Payment and Settlement Systems Act, 2007 — a milestone that marks Paytm’s comeback after a turbulent regulatory journey.
Credits: The Economic Times
From Rejection to Redemption
The approval, communicated in an official letter dated August 12, 2025, comes nearly three years after Paytm’s initial payment aggregator licence application was rejected in November 2022. Back then, the RBI cited non-compliance with foreign direct investment (FDI) norms and instructed the company to reapply.
That rejection wasn’t just a setback — it came with the sting of operational restrictions, including a ban on onboarding new merchants. This made the road ahead for Paytm’s merchant payments business especially challenging.
With the latest authorisation, those restrictions have now been lifted, allowing Paytm to restart merchant onboarding and reinvigorate its digital payments infrastructure.
Scope of the Approval — and What It Doesn’t Cover
While the RBI’s nod is a major win, it comes with clear boundaries. The in-principle authorisation only covers online PA operations as defined in the RBI’s PA-PG Guidelines. This means transactions falling outside these guidelines, such as pay-out transactions undertaken on behalf of merchants, cannot be routed through the escrow account designated for PA operations.
In simpler terms — Paytm can now handle online merchant payments, but it must ensure other types of payment flows remain separate.
Compliance Conditions and the Six-Month Clock
The RBI’s blessing also comes with strings attached. PPSL must:
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Conduct a system audit, including a cybersecurity audit, and submit a report within six months.
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Understand that if this deadline is missed, the in-principle authorisation will lapse, and the final approval will not be granted.
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Comply with RBI guidelines that mandate prior approval for any change in shareholding, acquisition of control, or transfer of payment system operations for non-bank payment system operators.
This means the next half-year will be a crucial test for PPSL’s compliance and operational readiness.
The Financial Turnaround Story
The timing of the RBI approval couldn’t be better for Paytm, which has staged a strong financial comeback. In Q1 FY26 (April–June 2025), the company posted a consolidated net profit of ₹123 crore, compared to a ₹839 crore loss in the same quarter a year ago.
More importantly, this was the first operationally-driven quarterly net profit since Paytm’s stock market debut.
The turnaround follows a rough patch beginning January 2024, when the RBI restricted Paytm Payments Bank — a move that triggered a six-month revenue dip. In response, Paytm tightened expenses, sold non-core assets like Paytm Insider, and recalibrated its merchant lending business.
Chinese Exit, Indian Repositioning
Adding to the narrative of transformation, Chinese fintech giant Ant Financial recently exited Paytm completely, selling its last 5.84% stake for about ₹3,800 crore via block deals. With this, Chinese ownership in Paytm has dropped to zero — a move likely to please regulators and investors alike.
Growth Metrics on the Upswing
In the latest quarter, operating revenue rose 28% YoY to ₹1,918 crore, while contribution profit jumped 52% YoY to ₹1,151 crore, delivering a healthy 60% contribution margin.
The markets have noticed — Paytm’s stock has been riding a bullish wave, reflecting renewed investor confidence in its long-term growth prospects.
Credits: Moneycontrol
What’s Next for Paytm?
With the ability to resume merchant onboarding, Paytm is poised to rebuild its position in India’s competitive payments space. The upcoming six months will be critical, as the company works to meet RBI’s audit requirements and secure final authorisation.
If all goes according to plan, Paytm’s combination of regulatory clearance, financial rebound, and strategic ownership changes could set the stage for a stronger, more India-focused growth trajectory.
In short — the comeback story isn’t complete yet, but the pieces are finally falling into place.
