Paytm is a step closer to restarting its digital wallet business after the Reserve Bank of India (RBI) granted preliminary authorisation to its payments services subsidiary to issue prepaid payment instruments, including digital wallets.
The development sent shares of Paytm's parent company, One 97 Communications, to a record high of ₹1,960 on Friday, November 13.
Paytm Payments Services Ltd (PPSL), a wholly owned subsidiary of One 97 Communications, received the RBI's in-principle approval to set up and operate a payment system for issuing prepaid payment instruments (PPIs). The authorisation is subject to compliance with the central bank's applicable regulations.
The company clarified in a stock exchange filing that the approval does not allow it to immediately resume wallet operations. PPSL will be able to offer prepaid instruments, including digital wallets, to customers only after securing the RBI's final authorisation, also known as a Certificate of Authorisation.
Audit required before final approval
As part of the conditions attached to the preliminary approval, the RBI has asked PPSL to conduct a system audit, including a cybersecurity audit, through an eligible auditor.
The audit must be carried out in accordance with the central bank's prescribed requirements for cyber resilience and digital payment security among non-bank payment system operators. The company has been given six months from the date of the RBI's letter to submit the audit report.
Failure to submit the report within the stipulated period will result in the in-principle authorisation lapsing automatically, after which the RBI will not consider granting final approval.
The subsidiary will also have to comply with the RBI's Master Directions on Prepaid Payment Instruments, dated August 27, 2021, as amended from time to time.
Regulatory action had halted Paytm's wallet operations
The latest approval comes more than two years after the RBI imposed restrictions on Paytm Payments Bank over persistent regulatory non-compliance, weaknesses in systems and controls, and supervisory concerns.
In March 2022, the central bank barred Paytm Payments Bank from onboarding new customers. It subsequently imposed wider restrictions in January and February 2024, prohibiting the bank from accepting fresh deposits, credits and top-ups in existing customer accounts, prepaid instruments and wallets.
These measures effectively disrupted Paytm's regular wallet operations. The RBI cancelled Paytm Payments Bank's banking licence on April 24, 2026, citing violations of licensing conditions and concerns over the bank's management and its conduct being detrimental to the interests of depositors.
The latest in-principle authorisation has been granted to PPSL, a separate wholly owned subsidiary of One 97 Communications, rather than the now-closed Paytm Payments Bank.
The approval therefore provides Paytm with a route to bring back wallet services under a different entity. However, the company must complete the prescribed audit and obtain the RBI's final authorisation before it can begin issuing prepaid payment instruments to customers.