RBI Bars Paytm Payments Bank amid Non-Compliances and Supervisory Concerns

• 02 Feb 2024

The Reserve Bank of India (RBI) has recently taken a stringent measure against Paytm Payments Bank, prohibiting it from accepting deposits or top-ups in various key products, including customer accounts, prepaid instruments, wallets, FASTags, and National Common Mobility Card (NCMC) after February 29.

• This decisive move comes in the wake of the RBI's concerns about "persistent non-compliances and material supervisory concerns."

Key Points

• Comprehensive Service Ban: Paytm Payments Bank is barred from offering its core services, including accounts and wallets, starting from March. This encompasses a broad range of services, potentially impacting a significant customer base.
• RBI Directives: The RBI has explicitly stated that no further deposits, credit transactions, or top-ups should be allowed after February 29, 2024. Exceptions are only made for interest, cashbacks, or refunds that may be credited at any time.
• Withdrawal and Utilization: Customers are permitted to withdraw or utilize balances from their accounts, including savings and current accounts, prepaid instruments, FASTags, and NCMC cards, without any restrictions up to their available balance.
• Reasons behind Action: The central bank aims to prevent any institution from exposing depositors' money to risks associated with these aspects.
• Long-standing Scrutiny: Paytm Payments Bank has been under RBI scrutiny since 2018. The central bank has been focusing on KYC compliance, IT-related issues, lack of information barriers within the group, and data access to China-based entities with indirect stakes in the parent company.
• Previous RBI Action: In October 2023, the RBI imposed a fine of Rs 5.39 crore on Paytm Payments Bank for regulatory compliance deficiencies, including failure to identify beneficial owners, monitoring payout transactions, and breaching regulatory ceilings.
• RBI Press Release: The RBI's press release cites persistent non-compliances and material supervisory concerns, prompting further supervisory action. The bank's nodal accounts are to be terminated, and settlement of pipeline transactions should be completed by March 15.