Paytm Bank Had Over 1000 Users With Same PAN, RBI Had Alerted ED About Money Laundering

The restrictions placed on Paytm Payments Bank by the RBI have stunned its users, investors, and the broader stock markets, but it appears that the RBI might’ve had plenty of reason to impose these curbs.

Paytm Payments Bank had inadequate KYC (Know Your Customer) compliances, which led to over a thousand accounts at the bank being linked to the same PAN card, NDTV Profit has reported. These customers had conducted hundreds of crores of transactions, which led to money laundering concerns for the banking regulator.

In addition, Paytm Payments Bank’s financial and non-financial business with comingled with that of One97 Communications, and an arm’s length distance wasn’t maintained with the promoter group. The RBI also had privacy concerns, because transactions for Paytm Payments Bank were being routed through the parent app, which was a separate business entity.

In addition, ET has reported that RBI had been mulling action against Paytm Payments for a while. A few months ago, RBI had alerted the Enforcement Directorate (ED) about possible money laundering and KYC violations at Paytm Payments Bank. The report suggested that Paytm Payments Bank could end up losing its payments bank license, given all the infringements flagged by the banking regulator over the last few years. The Revenue Secretary, however, has said that ED isn’t currently investigating Paytm.

Paytm Bank has had a fractious relationship with India’s banking regulator since its inception. In 2018, the RBI had stopped the bank from adding new customers after observations about the process the company followed in acquiring new customers, its adherence to know-your-customer (KYC) norms, and the way it internally stored customer data. The ban had been lifted 6 months later. In October, 2021, the RBI had imposed a monetary penalty on Paytm Payments Bank for violation of certain rules. This was after an RBI examination of the bank’s application for issue of final Certificate of Authorisation (CoA). In March 2022, RBI had directed Paytm Payments Bank to stop onboarding new customers, and just last week, RBI had directed the bank to stop accepting any deposits after 29th February, and ordered the closure of its nodal accounts.

Paytm’s stock has plummeted after the recent action — Paytm’s stock hit the 20 percent bottom circuit on the two consecutive days since the news broke. While the bank has managed to garner some support on social media with a few entrepreneurs calling RBI’s action excessive, the fact that Paytm Payments Bank might’ve had 1000s of bank accounts with the same PAN account operating within its system indicates that its lapses might’ve been much more serious than initially thought.