India's payments authority may grant Paytm third-party app license this week

The National Payments Corp of India (NPCI) is likely to approve a third-party application provider (TPAP) license for Paytm, formally known as One 97 Communications, by March 15, three sources directly aware of the development said on Tuesday.

The third-party application provider license will allow customers to continue using the Paytm app for payments through India's popular unified payment interface (UPI), even as its banking arm, Paytm Payments Bank, ceases operations by March 15, following regulatory action due to issues of non-compliance.

UPI, operated by the NPCI, is India's real-time payments system that allows users to transfer money across banks. "The (TPAP license) approval will come before March 15 and most of the checks have been completed," one of the sources said.

"While the integration with banks may take more than a month, the license approval should be in place before the deadline ends." None of the sources wished to be identified

because they were not authorised to speak to the media. NPCI did not immediately respond to a Reuters email seeking comment, while Paytm declined to comment. Reuters had reported last month that Paytm is likely to partner with Axis Bank, HDFC Bank, State Bank of India and Yes Bank for processing transactions through UPI.

Paytm, the third-largest app for UPI payments in the country, processed 1.41 billion monthly transactions worth 1.65 trillion rupees ($19.94 billion) in February down from 1.57 billion transactions valued at 1.93 trillion in January, according to data available on the NPCI website.

PhonePe and Google Pay are the two largest UPI payment apps in India. "Paytm's UPI transactions took a hit in February, largely due to a blow on the brand's reputation, but once TPAP license is approved, transaction volumes are expected to pick up," one of the sources said. "Paytm is regularly meeting NPCI to obtain the TPAP license."

The central bank is unlikely to extend the March 15 deadline set for Paytm Payments Bank to wind down its operations, one of the above sources and a fourth source aware of the central bank's thinking said.

The RBI did not immediately respond to a Reuters email seeking comment. After March 15, Paytm Payments Bank cannot accept any fresh deposits into its accounts or wallets.