Paytm Secures Approval from RBI to Operate as Payroll Service Provider

The Indian fintech giant Paytm has finally received the long-awaited approval from the Reserve Bank of India (RBI) to function as a payroll service provider. This development is particularly significant for the fintech sector, further cementing Paytm’s position in the competitive landscape of online payment solutions.

Approval Details from the RBI

On Tuesday, the RBI granted “in principle” approval to Paytm’s payment services unit to operate as an online payment aggregator. This was disclosed in a filing by its parent company, One97 Communications. The approval comes over two years after the company was initially denied a license due to non-compliance with investment regulations related to neighboring countries.

Impact of Regulation on Paytm’s Operations

Prior to receiving this license, Paytm faced restrictions that prevented it from onboarding new online merchants. The company, however, maintained that these limitations had “no material impact” on its overall operations or revenue. During the last annual general meeting, Paytm’s founder and CEO Vijay Shekhar Sharma expressed his intention to reapply for the payment aggregator license, highlighting his commitment to compliance and expansion.

Context and Challenges Faced by Paytm

This approval comes on the heels of previous regulatory challenges, including a ban imposed on Paytm Payments Bank, which restricted the acceptance of new deposits and credit transactions. In response, Paytm swiftly adapted by collaborating with leading banks like AXIS and HDFC, ensuring service continuity for both consumers and merchants in the online transaction ecosystem.

Enhanced Capabilities for Online Merchants

With the new license in hand, Paytm is set to enable online merchants to accept a variety of payment methods. These include credit and debit cards, net banking options, and the Unified Payments Interface (UPI) supported by the Indian government. Moreover, the approval alleviates previous restrictions imposed on merchant integrations, allowing Paytm to serve a broader range of clients.

Recent Developments and Market Position

In a related development, the Chinese fintech company Ant Group divested its remaining 5.8% stake in One97 Communications, selling it for $454 million. This follows a previous sale in 2023, indicating a significant shift in shareholder structure. Despite these challenges, Paytm remains a strong player in the fintech sector, ranking as the third most used UPI payment platform in India.

Financial Performance and Future Outlook

Paytm reported net revenues of approximately $14 million for the first quarter of its 2026 financial year, marking a shift from losses reported during the same period last year. Analysts had anticipated a loss, making this performance exceed expectations. With shares increasing by 13.25% since the beginning of 2025, there are signs of renewed investor confidence following regulatory setbacks.

Conclusion

The recent regulatory approval from the RBI marks a major milestone for Paytm, positioning it for growth in a rapidly evolving digital payments landscape. As the company prepares for further expansion and innovation, it aims to enhance its offerings for merchants and consumers alike, solidifying its role as a key player in India’s fintech revolution.