The National Payments Corporation of India (NPCI) on Thursday granted approval to One97 Communications Ltd (OCL) to participate in UPI as a third-party application provider (TPAP) under a multi-bank model.

Four banks – Axis Bank, HDFC Bank, State Bank of India, YES Bank – will act as payment system providers (PSPs) for Paytm parent One97 Communications, a statement from the Vijay Shekhar Sharma-led fintech said.

The statement said YES Bank will also act as a merchant acquiring bank for existing and new UPI merchants for One97 Communications.

The handle “@Paytm” will be forwarded to YES Bank. This will enable existing users and merchants to continue conducting UPI transactions and AutoPay mandates seamlessly and without disruption, it said.

Noida-based One97 Communications says it has been recommended to complete migration of all existing handles and mandates, if required, to new PSP banks at the earliest.

The Reserve Bank of India (RBI) had directed Paytm Payments Bank to stop accepting new deposits into its accounts and wallets from March 15. Paytm Payments Bank is 51% owned by Paytm CEO Vijay Shekhar Sharma while the remaining 49% is owned by One 97 Communications.

On Wednesday, the National Highways Authority of India (NHAI) advised Paytm FASTag users to get a new FASTag from another bank before March 15, 2024. “This will help avoid penalties or double charges when commuting on national highways,” it said.

In February, RBI Governor Shaktikanta Das said the banking regulator had given Paytm Payments Bank enough time to comply with regulations and that business restrictions had been imposed only when the company failed to listen to constructive cooperation.

“We give each RE enough time to meet the requirements. Sometimes it seems more than enough. We are a responsible regulator. If everything has been followed, why should we act,” Das said in the RBI press conference after introducing the policy.

The RBI has deepened its supervisory systems in recent years. “Our focus is always on the bilateral discussion of renewable energies. We are focusing on persuading the RE to take corrective action and giving him adequate time,” Das said.

“When constructive engagement does not work, we choose to impose business restrictions. Such restrictions are proportional to the gravity of the situation,” Das said, stressing that all measures are in the best interest of system stability and the interests of depositors.

The supervisory action on Paytm Payments Bank was taken after persistent non-compliance and months and years of bilateral engagement with the company, RBI Deputy Governor Swaminathan J said.

“We provide more than sufficient time to take corrective action. As a regulator, our job is to protect the interests of the end consumer and therefore the stability of the financial system,” said the deputy governor.