RBI Imposes Major Restrictions on Paytm Payments Bank: Operations Limited Post-February 29

In a significant move, the Reserve Bank of India (RBI) has imposed major business restrictions on Paytm Payments Bank, effective from February 29. The regulatory action comes in response to persistent non-compliances and material supervisory concerns identified during a comprehensive external audit of the bank’s systems.

RBI Imposes Restrictions on Paytm Payments Bank: Key Developments

1. Prohibitions on Banking Operations: The RBI directive prohibits Paytm Payments Bank from accepting fresh deposits, credit transactions, or top-ups in customer accounts, including prepaid instruments such as wallets and FASTags, after February 29.
2. Continued App Operation, Limited Paytm Bank Services: While the Paytm app is expected to continue normal operations, services linked to the Paytm Bank will only be available until February 29 or until the exhaustion of the available balance.
3. Termination of Nodal Accounts: The nodal accounts of Paytm’s parent company, One97 Communications Ltd., and Paytm Payments Bank Ltd., have been terminated by the central bank as part of the regulatory measures.
4. Background: Previous Regulatory Actions: This latest action follows a previous RBI order in March 2022, instructing Paytm Payments Bank to halt onboarding new customers immediately. The decision was prompted by concerns over the bank’s compliance with regulatory standards.
5. Comprehensive System Audit Findings: The RBI’s decision is rooted in the findings of a Comprehensive System Audit report and subsequent compliance validation report by external auditors, highlighting persistent non-compliances and ongoing supervisory concerns.
6. Withdrawal and Utilization of Balances: Customers are permitted to withdraw or utilize balances from their accounts, including savings and current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc., without any restrictions, up to their available balance.
7. Restrictions on Banking Services: After February 29, 2024, Paytm Payments Bank is restricted from providing any banking services beyond the withdrawal or utilization of balances. This includes fund transfers, BBPOU, and UPI facilities.
8. Termination of Nodal Accounts: The RBI has directed the immediate termination of the Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd., ensuring completion no later than February 29, 2024.
9. Settlement of Pipeline Transactions: The payments bank is mandated to settle all pipeline transactions and nodal accounts by March 15, with no further transactions permitted beyond this date.
10. Company Response: As of now, neither Paytm Payments Bank nor its founder/CEO, Vijay Shekhar Sharma, has issued a response to the RBI’s actions.