RBI slaps Rs. 5.39cr penalty on Paytm Payments Bank
The Reserve Bank of India (RBI) slapped a hefty penalty of Rs. 5.39 crore on Paytm Payments Bank for not adhering to Know Your Customer (KYC) regulations. The central bank pointed out that the bank failed to comply with the RBI (KYC) Directions, 2016, RBI Guidelines for Licensing of Payments Banks, and other related guidelines on cyber security. This penalty does not impact the validity of any transaction or agreement between the bank and its customers.
Special scrutiny and system audit conducted
RBI carried out special scrutiny from the KYC/AML perspective and a thorough system audit of Paytm Payments Bank, with auditors handpicked by the central bank. The examination exposed non-compliance with directions, including failure to identify beneficial owners for entities onboarded for payout services, inadequate monitoring and risk profiling for payout transactions, exceeding regulatory ceiling for end-of-day balances in certain customer accounts, delayed reporting of a cyber security incident, and failure to implement device binding control measures.
RBI asks Paytm why a penalty should not be imposed
After the examination, RBI sent a notice to Paytm Payments Bank, asking it to explain why a penalty should not be imposed for non-compliance with the directions. The central bank took into account the bank's response to the notice and oral submissions made during a personal hearing before concluding that the charge of non-compliance was substantiated and warranted a monetary penalty.
Implications and future outlook
The penalty on Paytm Payments Bank serves as a wake-up call for financial institutions to stick to regulatory guidelines and maintain strict compliance with KYC norms. It also emphasizes the significance of strong cyber security measures in safeguarding customer data and ensuring secure transactions.
