Who will be the White Knight for Paytm? RBI's FAQ for fintech hints at a sponsor bank

RBI on Friday extended the deadline for Paytm bank to stop accepting fresh deposits in its customer accounts and wallets, giving the fintech pioneer more time to forge partnerships for running its business as smoothly as possible.

Paytm Payments Bank can continue business as usual till March 15, the Reserve Bank of India said.

Along with the extension, the central bank released FAQs. Within that there is hint that a sponsor bank will step in for Paytm's dealings.  

Question: I am a merchant and I accept payments using a Paytm QR code, Paytm soundbox or Paytm POS terminal, linked to another bank account (not with Paytm Payments Bank). Can I continue to use this set-up even after March 15, 2024?

Answer: Yes. If your receipt and transfer of funds is linked to any bank account other than Paytm Payments Bank, you can continue to use this arrangement even after March 15, 2024.

In trap system or third-party application provider,  a payment processor app needs a sponsor bank to access UPI. 

For Paytm, its lending arm was the sponsor bank. With the bank out, the latest communication from RBI hints at a sponsor bank stepping in. 

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