New Delhi: The Reserve Bank of India (RBI) has taken strict action against Paytm Payments Bank Limited (PPBL), a subsidiary of the digital payments giant Paytm, for flouting various regulatory norms and guidelines. The central bank has imposed several restrictions on PPBL, such as prohibiting it from offering any services related to deposits, prepaid instruments, and e-wallets after February 29, 2024, and barring it from adding new customers. The RBI has also asked PPBL to submit a compliance report by March 31, 2024.
The action by the RBI comes after it found that PPBL had millions of non-KYC (Know Your Customer) compliant accounts, which violated the anti-money laundering and customer due diligence rules. The RBI also discovered that PPBL had used a single PAN (Permanent Account Number) to open multiple accounts and that some of the accounts had transactions worth crores of rupees, far exceeding the regulatory limit of Rs 10,000 for minimum KYC pre-paid instruments. These irregularities raised serious concerns over the safety and security of the customers’ funds and the integrity of the payment system.
The government, however, has distanced itself from the matter, saying that it is the job of the RBI to deal with the Paytm issue and that it has nothing to do with it at present. Financial Services Secretary Vivek Joshi said in an interview with ‘PTI-Bhasha’ that the RBI is the regulator of the banks and that it would have acted in the overall interest of the consumer and the economy. He also said that PPBL is a small financial entity and has no systemic stability concerns.
Joshi also commented on the Foreign Direct Investment (FDI) in Paytm’s payment aggregator subsidiary, Paytm Payment Gateway Private Limited (PPGPL), which has sought permission from China for investment. He said that the application is under review as it is an inter-ministerial process and that it is under consideration. He did not disclose the amount or the source of the investment.
PPBL, which was launched in 2017, is one of the six payments banks in India, which are licensed by the RBI to provide basic banking services such as savings accounts, current accounts, and remittances, but are not allowed to lend money or issue credit cards. PPBL claims to have over 64 million savings accounts and more than 35 crore e-wallets. However, according to an analyst, only about four crore of these e-wallets are active, while the rest are inactive or have no balance or very low balance.
In the backdrop of the RBI action, Paytm founder and CEO Vijay Shekhar Sharma met Finance Minister Nirmala Sitharaman on Tuesday. Sources said that he sought the government’s intervention and support in resolving the issue. However, he was reportedly told that Paytm would have to approach the RBI and comply with its directions. Sharma also appealed to the customers of PPBL to not panic and assured them that their money was safe and secure. He said that PPBL will work with the RBI to address the concerns and restore the normal functioning of the bank. He also said that PPBL will facilitate customers who want to transfer their accounts to other banks or entities.
