RBI bars Paytm Payments Bank from offering services starting March
The Reserve Bank of India has placed limitations on Paytm Payments Bank Limited (PPBL), barring it from accepting deposits or top-ups in customer accounts, wallets, and FASTags after February 29, 2024. This move comes after a thorough system audit and compliance validation by external auditors, which exposed ongoing non-compliance issues and significant supervisory concerns within the bank. However, the order doesn't affect Paytm's UPI service.
Customers allowed to withdraw or utilize balances
As per RBI's order, PPBL will not be allowed to take deposits in any customer accounts after February 29. No credit transactions or top-ups will be allowed either. The bank is allowed to credit any interest, cashbacks, or refunds in customer accounts. Customers can access and use their funds without any limitations. Importantly, you can use Paytm as a digital payment option provided your account is linked to an external bank and not a Paytm Payments Bank account.
Complete pipeline transactions by March 15: RBI to Paytm
While restricting the services offered by Paytm, the RBI has also ordered the termination of the nodal accounts of Paytm's partner company One97 Communications Ltd as well as Paytm Payments Services Ltd. RBI mentioned that the termination should not be delayed beyond February 29. Paytm Payments Bank will have to settle all pipeline transactions and nodal accounts by March 15.
RBI's previous restrictions on PPBL
PPBL is not new to regulatory bans. In March 2022, RBI had barred Paytm Payments Bank from onboarding new customers due to KYC compliance and IT related issues. The central bank also asked PPBL to appoint an auditor to audit its IT system. Paytm was hopeful that RBI would eventually lift restrictions but that hasn't happened till date. In June 2018, RBI had inquired about the mechanism which PPBL followed in user acquisition and questioned its KYC norms.
Who owns Paytm Payments Bank?
PPBL is a joint venture between Vijay Shekhar Sharma and the listed company One97 Communications—parent of Paytm. Sharma owns 51% of the bank in his personal capacity. PPBL was launched on May 23, 2017. As per the bank's website, it has over 300 million wallets and 30 million bank accounts. However, last year, the company's website said it had 60 million bank accounts. It also claims to be largest issuer of FASTag with over eight million FASTag units issued.
