As regulatory actions cast a shadow on Paytm Payments Bank, depositors find themselves questioning the safety of their funds. In contrast to previous banking crises like Yes Bank or PMC Bank, industry experts are emphasizing that Paytm Payments Bank depositors need not succumb to panic.
The Reserve Bank of India (RBI) imposed business restrictions on the bank due to violations of prudential norms and non-compliance with rules. Despite the regulatory intervention, depositors have until February 29 to make informed decisions about their accounts.
Individual customers hold the flexibility to either retain their funds with the bank, transfer them to another account, or keep them in cash. The RBI has assured existing customers that they can withdraw and utilize their funds in various services until their account balance is exhausted.
Crucially, the central bank highlighted that withdrawals or the use of balances, including services like FASTags and National Common Mobility Cards, are permitted without restrictions.
The safety of funds in Paytm Payments Bank accounts is grounded in two key factors. Firstly, the Deposit Insurance and Credit Guarantee Corporation (DICGC), under the RBI, offers insurance coverage for deposits up to Rs 5 lakh in the event of a bank failure.
Secondly, in adherence to RBI regulations, payment banks like Paytm are mandated to invest daily deposit balances in government securities and commercial bank balances. This ensures a seamless process for withdrawals in line with regulatory requirements.
DICGC insurance remains applicable to active accounts until the date of liquidation, cancellation of the bank’s license, or any announced merger or reconstruction measures. Experts emphasize that the Paytm Payments Bank situation is not comparable to the crises faced by Yes Bank or PMC Bank, where swift interventions and reconstruction schemes ensured depositor safety.
Former RBI Deputy Governor N S Vishwanathan provides reassurance to Paytm Payments Bank depositors, affirming that DICGC insurance covers deposits up to Rs 2 lakh, providing an additional layer of protection and alleviating concerns about the safety of their funds.
