The Reserve Bank of India (RBI) has issued in-principle approval to Paytm’s subsidiary, Paytm Payments Services Limited (PPSL), allowing it to function as a licensed payment aggregator under the Payment and Settlement Systems Act, 2007.
This landmark approval follows last year’s Indian government green light for Paytm’s downstream investment in PPSL, resolving earlier foreign investment compliance hurdles that had kept it out of the running for a license.
Check out the details shared by the official LinkedIn handle of Paytm:
What does it mean for Paytm
With this nod, PPSL can now work toward fulfilling RBI’s conditions for full payment aggregator licensing, including technical and financial requirements. Once fully licensed, PPSL will be able to onboard new online merchants directly, offer comprehensive payment aggregation services, and compete head-on with peers like Razorpay, PayU, and Cashfree. Currently, PPSL handles payments for existing merchants on Paytm’s platform but has been restricted from new merchant onboarding without the final aggregator license.
Strategic Significance of PPSL for Paytm’s Business
PPSL already contributes more than 50% of Paytm’s consolidated revenue and is a key growth driver for the company as well as its digital payments ecosystem. The license plays a vital role in enabling Paytm to take back complete control over its payment processing, augment merchant offerings with enhanced services including tokenization, cross-border payments, and recurring billing, and combine offline-online payment solutions smoothly.
Given India’s expanding payment aggregator market, expected to exceed $5.9 trillion (₹500 trillion) by 2030, regaining the license positions Paytm to capitalize on a booming sector with intensified competition and narrowing margins. The regulator’s approval underscores RBI’s evolving stance toward fintech compliance and market stability.
Paytm’s Path to Profitability
In conjunction with regulatory advancements, Paytm recently announced profitability for the first time, a major achievement after years of investment and strategic overhaul. Such profitability has also enhanced investor optimism, evident in better market sentiment.
Ant Group’s Stake Reduction
At the same time, Ant Group, one of Paytm’s largest shareholders, has shed its entire India holdings in the open market, indicating a strategic capital reallocation.
The reduction in stake works for Ant’s portfolio rebalancing worldwide but also probes market demand for Paytm shares in the midst of India’s fast-changing digital payments ecosystem.
India’s Payment Aggregator Ecosystem
India’s payment aggregator landscape is fragmented and highly competitive, with more than 50 licensed players juggling regulatory norms, pricing constraints, and fast-paced technological advancements. The increasing digital economy has fueled demand for innovative payment options among consumers and merchants alike, compelling growth in areas like cross-border e-commerce and SaaS platforms.
Complete licensing will enable PPSL to aggressively scale its merchant acquisition, offer customized payment infrastructure, and incorporate sophisticated fraud detection and settlement capabilities, all of which are needed to capture market share.
The Road Ahead for Paytm and PPSL
Although the in-principle RBI approval is a promising development, PPSL needs to fulfill all regulatory requirements to secure the payment aggregator license, which will help it resume and grow its payment services fully. This milestone coupled with Paytm’s strengthening finances and changing shareholder profile provides the backdrop for the company’s next growth phase in India’s vibrant digital payment space.
