The Reserve Bank of India granted in-principle approval to Paytm's Payment Services unit to operate as an online payment aggregator on 12 August 2025, delivering a pivotal regulatory milestone for One97 Communications after more than eighteen months of sustained pressure from the central bank. The approval means that Paytm's payments intermediation business can proceed towards full authorisation under the RBI's payment aggregator licensing framework, a pathway that had been in significant doubt following the events of early 2024.
The clearance follows the RBI's February 2024 restrictions on Paytm Payments Bank, which severely curtailed the business activities of that entity and triggered a 32.7% year-on-year decline in the company's total revenue. The Payments Bank restrictions forced One97 Communications to restructure its operating model and seek alternative regulatory approvals to sustain its core payments and financial services businesses. The August 2025 in-principle approval for the Payment Services unit represents the most consequential regulatory green light the company has received since that restructuring began.
FINANCIAL RECOVERY GATHERS MOMENTUM
Paytm's financial results have improved materially in the period following the February 2024 restrictions. The company reported a profit of INR 122.5 crore in the first quarter of financial year 2026, a dramatic swing from losses that exceeded INR 800 crore in the equivalent period the prior year. The recovery has been driven substantially by its revived lending business, which operates under the Default Loss Guarantee model, an arrangement that allows Paytm to facilitate credit products through partner financial institutions while absorbing a defined portion of any default losses that arise.
The DLG structure enables the company to earn lending-related income without holding a banking licence, a practical workaround that has allowed the loans and credit distribution segment to rebuild revenues at pace. The scale of the swing from deep losses to profitability within a single fiscal year reflects both significant cost reduction and a meaningful return of merchant and consumer transaction volumes on the Paytm platform, which continues to serve one of India's largest digital commerce user bases.
WHAT AGGREGATOR STATUS MEANS FOR PAYTM
Payment aggregators sit at the centre of India's digital payments ecosystem, collecting payments from customers on behalf of merchants and settling funds after deducting their service fees. Regulated payment aggregators must meet the RBI's requirements around net worth, data localisation, customer due diligence, and grievance redressal. Securing in-principle approval confirms that the Payment Services unit has satisfied the initial threshold criteria and may proceed to demonstrate full compliance ahead of the grant of a final certificate of authorisation.
The approval restores a measure of regulatory certainty to Paytm's business model at a time when investor sentiment had been substantially shaped by the upheaval of the prior eighteen months. With the aggregator approval now at the in-principle stage, the company's position in the Indian payments landscape appears more stable than at any point since the Payments Bank restrictions took effect in February 2024. The remaining step is converting the in-principle approval into a final licence, a process that will require the RBI to complete its assessment of the unit's full operational readiness and its compliance infrastructure before granting the definitive authorisation.