Paytm Payments Bank has had a rough few years trying to keep up with RBI’s compliance norms, and things now seem to have gotten a lot worse.
The Reserve Bank of India has directed Paytm Payments Bank to stop fresh withdrawals, top-ups and credit transactions from 1st March 2024. RBI said this action had been taken following “persistent non-compliances” and “material supervisory concerns” at the bank. In 2022, RBI had directed Paytm Payments Bank to stop onboarding new customers.
“In a press release dated March 11, 2022, the Reserve Bank of India..had directed Paytm Payments Bank Ltd (PPBL or the bank) to stop onboarding of new customers with immediate effect,” RBI’s latest notification said. “The Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action,” it added.
The RBI said Paytm Payments Bank will not be allowed to take further deposits in any customer accounts from 1st March. It added that no credit transactions will be allowed either, including via wallets. However, the withdrawal or utilisation of balances by its customers will be permitted without restrictions, the central bank said.
Paytm Payments Bank has had a troubled relationship with its regulator, the Reserve Bank of India. 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.
Nearly two years later, instead of lifting its previous ban, the RBI has chosen to stop deposits to the accounts of existing customers. This effectively cripples the operations of the bank — existing customers will be able to spend their remaining balances with Paytm Payments Bank, but will be unable to add deposits, which means that their accounts will soon run out of money and become inoperable. This will come as a fresh blow for Paytm, which has seen its stock flail at the stock markets since going public in 2021.
The full text of the notification follows:
Accordingly, in exercise of its powers under section 35A of Banking Regulation Act, 1949 and all other powers enabling it in that behalf, the Reserve Bank of India, has today directed PPBL as below:
(i) 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.(ii) Withdrawal or utilisation of balances by its customers from their accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc. are to be permitted without any restrictions, upto their available balance.
(iii) No other banking services, other than those referred in (ii) above, like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc.), BBPOU and UPI facility should be provided by the bank after February 29, 2024.
(iv) The Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd. are to be terminated at the earliest, in any case not later than February 29, 2024.
(v) Settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024 and no further transactions shall be permitted thereafter.