Paytm has 95 million active monthly users, compared to Google Pay's 22 million
The row has erupted amid heightened debate about user privacy and how technology firms treat data in India and abroad. The government is developing a new data protection law which could force companies to change how they transfer or store customer data.
Google told Reuters in a statement that the changes were made to make it easier for customers to understand their monetisation and data usage policy.
It declined to comment on whether they were made due to Paytm's letter or any subsequent communication from the NPCI.
"These changes are done from time to time and are based on product features and development," a Google spokesman said.
Dilip Asbe, the chief of the NPCI which oversees the payments services in India, declined to comment.
Paytm, which is backed by China's Alibaba and Japan's SoftBank, also declined comment.
Paytm's letter to NPCI indicates the increasingly fierce competition in India's digital payments market, which is expected to grow five-fold to $1 trillion by 2023.
Other companies vying for a bigger share of the market include PayPal and Facebook's Whatsapp.
Paytm gained traction in India after Prime Minister Narendra Modi banned high-value notes in November 2016, boosting digital payments. It has 95 million active monthly users, compared to Google Pay's 22 million.
Both apps offer payment services using NPCI's Unified Payments Interface (UPI) system that allows instant money transfers and merchant payments.
© Thomson Reuters 2018