Paytm Wallet to resume; RBI grants approval; company to also enter the prepaid card business..

Paytm will soon be able to relaunch its wallet service. This means users will be able to store funds in their wallets and use that balance for purchases, bill payments, or money transfers. The company has received preliminary approval for this from the banking regulator, the Reserve Bank of India (RBI). Following the closure of its Payments Bank, the company will now be able to operate its wallet business independently. Furthermore, receiving final approval would also pave the way for the company to enter the prepaid card business.

Friday proved to be a very positive day for Paytm. The Reserve Bank of India (RBI) granted preliminary approval to the company’s payment services unit, Paytm Payments Services, to issue prepaid payment instruments—a category that includes digital wallets. Following this news, Paytm’s shares rallied, reaching a record high.

The company stated that once final approval from the RBI is secured, Paytm Payments Services will be able to offer prepaid payment instrument facilities to its customers. This will allow Paytm to operate its wallet business independently, separate from Paytm Payments Bank.

The company could also enter the prepaid card business.
The RBI’s approval could open up new business opportunities for Paytm, including not just digital wallets, but also the prepaid card segment.

According to Anand Dama, Executive Director and Head of Banking & Financial Services Research at Nuvama Institutional Equities, this approval could unlock new revenue streams for Paytm. It also signals a reduction in regulatory pressure on the company, which is a positive development for its stock.

However, Dama noted that this is only a preliminary approval, and obtaining the final license will take time. Consequently, any potential impact of this approval on the company’s earnings is unlikely to be seen until the 2028 fiscal year. Shares Rise 1.8% to Reach a Record High
Paytm shares saw a surge on Friday following news of preliminary approval from the RBI. During trading, the shares climbed 1.8% to reach ₹1,960, eventually closing with a gain of 0.8%.

So far this year, Paytm’s shares have risen by approximately 50%. This rally is also attributed to strong growth across the company’s various business segments.

Did Paytm’s Wallet Business Begin in 2014?
Paytm launched its digital wallet business in 2014. Within a few years, it became the largest digital wallet in the country. In 2017, to comply with regulatory requirements, the company transferred this business to Paytm Payments Bank.

However, in 2022, the RBI barred the bank from onboarding new customers. Subsequently, in January 2024, the central bank imposed even stricter restrictions, prohibiting the bank from accepting new deposits, extending credit, or facilitating top-ups for existing customer accounts and wallets.

The RBI took these actions due to persistent lapses in regulatory compliance and concerns regarding oversight. These restrictions effectively brought the standard process of adding funds to Paytm wallets to a near-complete standstill.

Earlier this year, the RBI also revoked the banking license of Paytm Payments Bank, initiating the process for the bank's closure. The preliminary approval now granted to Paytm Payments Services marks a significant step toward reviving the company’s wallet business; however, final approval from the RBI will still be required.

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