Paytm to focus on UPI Lite Wallet after RBI's crackdown on payments bank

Users can add up to Rs 4,000 daily and carry out low-value transactions without requiring a PIN

One97 Communications, the company that operates the brand Paytm, said on Monday it was focussing on the Unified Payments Interface (UPI) Lite wallet to move the users who prefer the feature for low-value transactions.

The company’s focus on the UPI Lite feature comes months after the Reserve Bank of India (RBI) cracked down on its associate entity Paytm Payments Bank. The banking regulator had barred the payments bank from accepting fresh credits in its mobile wallets after March 15 this year.

“We see the wallet as an essential payment tool that lets users keep money for everyday use and make quick payments on the go. Paytm UPI Lite improves this experience, allowing for faster transactions at local stores, street vendors, and for regular purchases while keeping bank statements clear,” said a Paytm spokesperson. 

Currently, customers with funds in their Paytm wallet can withdraw or transfer it to another wallet or bank account, up to the available balance. Once the balance is exhausted, they will no longer be able to add money to the Paytm wallet, as per the RBI directions.

A UPI Lite wallet is different from Paytm’s in-house wallet operations. UPI Lite processes low-value transactions that have been set at below Rs 500, according to the National Payments Corporation of India (NPCI) website. The feature is useful for customers to carry out small-ticket transactions such as paying for groceries, and commute fares, among others.

Customers using the UPI Lite feature can add up to Rs 2,000 to their wallet twice a day, reaching a total daily capacity of Rs 4,000. They can further transact using this wallet balance without the requirement of a PIN. The UPI Lite wallet is native to fintechs such as Paytm and is embedded in their application.

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Other fintech majors offering the UPI Lite solution to users include PhonePe, Google Pay, Navi, and Groww, among six other players. It runs off the existing UPI ecosystem protocols for mobile phones to ensure commonality, compliance and system acceptance. It was launched in September 2022. 

All banks do not support the UPI Lite feature for customers. For instance, on Paytm, UPI Lite is only supported by banks such as Canara Bank, Central Bank of India, HDFC Bank, Indian Bank, Kotak Mahindra Bank, Punjab National Bank, State Bank of India, and Axis Bank. In total, 34 banks are live with the UPI Lite feature, NPCI website shows.

Last month, NPCI permitted Paytm to start migration of users to a new payment service provider (PSP) the bank handles. This came after the NPCI allowed Paytm to function as a third-party application provider (TPAP) on the UPI in March. Four banks — State Bank of India (SBI), Axis Bank, HDFC Bank, and YES Bank — act as PSPs to Paytm.