RBI Has Put Restrictions On Paytm Payments Bank

RBI directed Paytm Payments Bank to cease accepting new deposits in its accounts or popular wallets after February 29, 2024.

The regulator informed Paytm Payments Bank, a subsidiary of one of India’s largest payment firms, Paytm, that it will be prohibited from accepting new deposits, facilitating credit transactions, or offering fund transfers, including Unified Payments Interface (UPI) facility after February 29. Yogesh Dayal, a chief general manager with the central bank, stated in a press release, “No further deposits or credit transactions or top-ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime.”

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Customers are allowed to withdraw or utilise balances from their accounts, including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc., without any restrictions, up to their available balance, according to the statement.

Reason Behind Why RBI Puts Restriction on Paytm Payment Bank

In March 2022, the RBI directed Paytm Payments Bank to cease adding new customers. Despite this, a Comprehensive System Audit report and subsequent compliance validation report by external auditors uncovered ongoing non-compliance and significant supervisory concerns in the bank. The RBI, without disclosing specifics, stated that these findings warranted additional supervisory action. The regulatory action against Paytm Payments Bank was executed under Section 35A of the Banking Regulation Act, 1949, as confirmed by the central bank.

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Paytm Payment Bank on Restrictions

In response to the RBI’s directives, Paytm Payments Bank, affiliated with One 97 Communications Limited (OCL), stated that it is promptly taking actions to adhere to the regulatory instructions. OCL, functioning as a payments company, collaborates with numerous banks (beyond Paytm Payments Bank) for the development of various payment products, as mentioned in a statement by the fintech company on Thursday.

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The statement declared that there will be an expedited execution of plans, leading to a complete transition to alternative bank partners. OCL expressed its commitment to exclusively collaborate with other banks, excluding Paytm Payments Bank Limited in the future. The statement emphasized that the upcoming stage of OCL’s journey involves a persistent expansion of its payments and financial services business, solely through partnerships with other banks.

Paytm anticipates a potential adverse impact on its annual earnings ranging from ₹300 crore to ₹500 crore due to the RBI’s directive preventing Paytm Payments Bank from accepting new deposits. Despite this setback, the company expresses confidence in its ability to persist on the path of enhancing profitability.