Indian fintech Paytm wins a major regulatory battle days after key investor exit

Indian fintech giant Paytm has received long-awaited approval from the country’s central bank to operate as a payment services provider for online merchants — just days after one of its Chinese investors sold its entire stake — marking a key regulatory breakthrough after months of setbacks and scrutiny.

On Tuesday, the Reserve Bank of India granted “in-principle” approval to Paytm’s Payment Services unit to operate as an online payment aggregator, parent company One97 Communications said in its filing (PDF) to Indian stock exchanges. The approval comes more than two years after the Noida-based fintech was initially denied the license in November 2022 due to non-compliance with India’s rules on receiving investments from countries that share a land border.

Without the license, Paytm was barred from onboarding new online merchants. At the time, the company said the restriction had “no material impact” on its business or revenues. However, at its annual general meeting last September, One97 Communications founder and CEO Vijay Shekhar Sharma stated his intention to reapply for the payment aggregator license.

The approval also comes over a year after the RBI banned Paytm Payments Bank from accepting fresh deposits and enabling credit transactions. Paytm weathered that impact by quickly shifting gears and partnering with Axis, HDFC, State Bank of India, and Yes Bank to make them serve as payment system providers for its consumers and merchants involved in online transactions and autopay mandates.

With the new license, Paytm can operate as a service provider for online merchants, enabling them to accept a range of payment methods, including cards, net banking, and the Indian government-backed Unified Payments Interface (UPI). The approval also lifts the online merchant onboarding restrictions imposed by the central bank in 2022.

The approval comes just a week after China’s Ant Group exited Paytm by selling its remaining 5.8% direct stake in One97 Communications for $454 million through block deals. This follows an earlier exit in 2023, when Ant Financial sold a 10.3% stake — worth $628 million — to Sharma in a no-cash deal.

Paytm is required to undertake a “system audit,” including a cybersecurity review, and submit its report to the Reserve Bank of India within six months. If it fails to do so, the approval will lapse, per the RBI letter enclosed with the company’s stock exchange filing. The license is also limited to online payment services and does not extend beyond that scope.

The latest development will help Paytm control most of its value chain, from its offline sound boxes to the online payment gateway, and reduce its reliance on other bank partners, fintech investor Osborne Saldanha told TechCrunch.

Paytm is currently the third most-used UPI payments platform, behind Walmart-owned PhonePe and Google Pay. The fintech accounted for 6.9% of the total 18.4 billion UPI transactions in June and 5.6% of the transaction value, per the National Payments Corporation of India (NPCI). In total, Paytm processed 1.27 billion UPI transactions worth ₹1.34 trillion (approximately $15 billion).

Although Paytm trails PhonePe and Google Pay in the UPI market — with the duo handling over 82% of all UPI transactions in June — the company offers a broad suite of businesses and services to attract both consumers and merchants. These include offline merchant payment solutions with integrated hardware, software, and service layers, as well as a growing credit and lending business.

Paytm reported (PDF) net income of ₹1.23 billion (approximately $14 million) for the first quarter of its financial year 2026, ending in June — a turnaround from a loss during the same period last year. The results beat expectations, as analysts had projected a loss of ₹1.27 billion (approximately $14.5 million). Revenue rose 28% year-over-year to $224 million, while the company’s contribution margin improved to 60%, up from 50% a year ago.

In addition to its recent financial growth, Paytm’s shares have risen 13.25% year-to-date in 2025, signaling that the company is beginning to regain market confidence after more than a year of regulatory setbacks. The stock closed at ₹1,118.50 (approximately $13) on Wednesday, just before the regulatory approval was announced.