In an important step, Reserve Bank of India (RBI) have imposed major trade restrictions on Paytm Payments BankEffective from 29 February. The regulatory action comes in response to persistent non-compliance and material supervisory concerns identified during a comprehensive external audit of the bank’s systems.
RBI bans Paytm Payments Bank: Key developments
- Restrictions on Banking Operations: The RBI direction bars Paytm Payments Bank from accepting fresh deposits, credit transactions or top-ups into customer accounts, including prepaid instruments like wallets and Fastag, after February 29.
- Continuous app operations, limited Paytm Bank services: While the Paytm app is expected to continue normal operations, services linked to Paytm Bank will be available only till February 29 or till the available balance is exhausted.
- Termination of Nodal Accounts: The nodal accounts of Paytm’s parent company, One97 Communications Ltd and Paytm Payments Bank Ltd have been frozen by the central bank as part of the regulatory measures.
- Background: Previous Regulatory Actions: This latest action follows the previous RBI order in March 2022, in which Paytm Payments Bank was directed to stop onboarding new customers immediately. The decision was taken due to concerns over the bank’s compliance with regulatory standards.
- Comprehensive System Audit Findings: The RBI decision is based on the findings of a comprehensive system audit report and subsequent compliance verification report by external auditors, which highlighted persistent non-compliance and ongoing supervisory concerns.
- Withdrawal and usage of balance: Customers are allowed to withdraw or use up to the available balance from their accounts including savings and current accounts, prepaid instruments, Fastag, National Common Mobility Card etc. without any restrictions.
- Restrictions on banking services: After February 29, 2024, Paytm Payments Bank is restricted from providing any banking services other than balance withdrawal or utilization. This includes fund transfer, BBPOU and UPI facilities.
- Termination of Nodal Accounts: RBI has directed for immediate closure of nodal accounts of One97 Communications Limited and Paytm Payments Services Limited, which will be ensured to be completed before February 29, 2024.
- Settlement of pipeline transactions: It is mandatory for the Payments Bank to settle all pipeline transactions and nodal accounts by March 15, with no transactions allowed after this date.
- Company response: As of now, neither Paytm Payments Bank nor its Founder/CEO Vijay Shekhar Sharma has issued any response to the RBI action.