In a significant move, the Reserve Bank of India (RBI) has taken regulatory action against Paytm Payments Bank Ltd, citing ongoing supervisory concerns and non-compliances. The apex bank’s decision, announced in an official statement on Wednesday, prohibits the bank from accepting fresh deposits and engaging in credit transactions, effective February 29, 2024.
The regulatory action comes as a result of the bank’s failure to adequately address compliance issues, according to the RBI. Paytm Payments Bank, a subsidiary of One 97 Communications Ltd headquartered in Noida, will no longer be able to accept new deposits or conduct credit transactions, including through its wallets.
Existing customers, however, can still withdraw or utilize their current balances without any restrictions. Despite the limitations, fundamental services such as fund transfers, including through India’s Unified Payment Interface (UPI), will be halted. Nodal accounts of One97 Communications Ltd and Paytm Payments Services are set to be terminated by the end of February.
Activities such as topping up customer accounts, prepaid instruments, wallets, and cards for paying road tolls will also be restricted. Nevertheless, the bank retains the ability to credit interest, cashbacks, or refunds into customer accounts.
It’s important to note that while these restrictions primarily impact services linked to Paytm Payments Bank accounts, they are unlikely to affect Paytm’s wallet application and UPI services linked to accounts of other banks after the RBI’s deadline.
The RBI has not specified a timeline for reviewing these restrictions, leaving the duration of the supervisory measures uncertain. This development follows actions taken nearly two years ago when the regulator prohibited Paytm Payments Bank from acquiring new customers due to rule violations, as reported by Bloomberg News. Founder Vijay Shekhar Sharma had contested the allegations at that time, asserting the bank’s full compliance with Indian regulations.
