New Delhi: The Reserve Bank of India (RBI) on Wednesday imposed severe restrictions on Paytm Payments Bank Ltd (PPBL), a subsidiary of One97 Communications Ltd, for violating various regulatory norms and failing to address supervisory concerns. The RBI ordered PPBL to stop adding new customers and accepting deposits in any form from February 29, 2024. The RBI also directed PPBL to terminate its nodal services and cease offering any banking services after the deadline.
The RBI’s action came after a comprehensive system audit report and a subsequent compilation validation report revealed that PPBL had persistently flouted compliance standards and had several deficiencies in its operations. The RBI said that the audit findings and the material supervisory concerns warranted further supervisory action against PPBL.
PPBL is one of the few payment banks in India, which is a new category of banks that can offer basic banking services such as savings and current accounts, remittances, and prepaid instruments. However, payment banks cannot lend money or accept deposits above ₹ 2 lakh per account. They also have to maintain a minimum capital adequacy ratio of 15% and invest at least 75% of their deposits in government securities.
The RBI’s restrictions will have a significant impact on PPBL’s business and customers. PPBL claims to have over 64 million customers and processes over 1 billion transactions per month. PPBL also offers services such as FASTags, National Common Mobility Cards, and Paytm Wallets, which are linked to its accounts.
According to the RBI’s order, PPBL will not be allowed to onboard any new customers or accept any deposits or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024. PPBL will also not be able to perform any credit transactions, including via wallets, or offer any fund transfers, including via the Unified Payments Interface (UPI).
The RBI also instructed PPBL to close the nodal accounts of One97 Communications Ltd and Paytm Payments Services Ltd, which are used for settling transactions with other banks and payment systems, at the earliest and not later than February 29, 2024.
The existing customers of PPBL, however, can withdraw or utilize their existing balances without any restrictions, up to their available balance. The RBI said that PPBL can also credit any interest, cashback, or refunds in the accounts of customers, but no further deposits credit transactions, or top-ups will be allowed.
The RBI’s action is not the first time that PPBL has faced regulatory scrutiny. In 2018, the RBI barred PPBL from opening new accounts for six months after finding lapses in its know-your-customer (KYC) processes and data security. PPBL had resumed its operations in 2019 after complying with the RBI’s directions.
PPBL has not issued any official statement on the RBI’s latest order. However, sources close to the company said that PPBL is in talks with the RBI to resolve the issues and restore its services. They also said that PPBL’s wallet application and UPI services linked to the accounts of other banks will not be affected by the RBI’s decision.