RBI imposes major curbs on Paytm Payments Bank

New Delhi: The Reserve Bank of India (RBI) on Wednesday imposed stringent restrictions on the operations of Paytm Payments Bank Ltd (PPBL) due to supervisory concerns. The central bank restricted Paytm Payments Bank Ltd from fresh deposits and credit transactions across its services.

The directives, issued under the authority of section 35A of the Banking Regulation Act, 1949, come after an extensive examination of the payment bank's practices and compliance status. The regulatory action follows an initial directive dated March 11, 2022, wherein the RBI directed Paytm Payments Bank to halt the onboarding of new customers.

Subsequent reports from comprehensive system audits and compliance validations conducted by external auditors revealed “persistent non-compliances and continued material supervisory concerns in the bank”, the RBI said in its release, prompting the central bank to take further supervisory measures.

The restrictions

Paytm Payments Bank is prohibited from accepting new deposits, credit transactions, or top-ups in any customer accounts or associated instruments after February 29. Paytm Payments Bank has been directed to cease the provision of all banking services beyond basic account access after February 29. The bank will also not be allowed to offer fund transfers, including via India's popular Unified Payment Interface (UPI) facility, the RBI said.

What is allowed

Paytm Payments Bank is allowed to deposit interest, cashback or refunds in the customer accounts. The existing customers are allowed unrestricted withdrawal or utilisation of their balances across various accounts and instruments, including savings bank accounts, prepaid instruments, FASTags, and National Common Mobility Cards (NCMC).

A payments bank is allowed to take small deposits up to 200,000 Indian rupees. These entities are not allowed to lend directly but can facilitate and sell loan products. Paytm Payments Bank is an associate of listed entity One 97 Communications Ltd, which holds a 49% stake in the unit. The regulatory directives also mandate the termination of nodal accounts associated with One97 Communications Ltd and Paytm Payments Services Ltd. by February 29.

Paytm Payments Bank is required to settle all pending transactions and nodal account obligations initiated on or before February 29 by March 15.