RBI Bars Paytm Payments Bank From Accepting Deposits After February 29

The Reserve Bank of India (RBI) has taken regulatory action against Paytm Payments Bank Ltd (PPBL), prohibiting the bank from accepting deposits or top-ups in any customer account, prepaid instruments, wallets, and FASTags, among other services, after February 29. This move by the RBI comes after a comprehensive system audit report and subsequent compliance validation report by external auditors revealed persistent non-compliances and material supervisory concerns in the bank.

As a result of the regulatory action, Paytm Payments Bank, PPBL customers will be allowed to withdraw or utilize balances from their accounts, including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc., without any restrictions, up to their available balance. However, other banking services, such as fund transfers (including AEPS, IMPS, etc.), BBPOU, and UPI facility, will no longer be provided by the bank after February 29, 2024.

The RBI has also directed the termination of Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd. at the earliest, not later than February 29. Settlement of all pipeline transactions and nodal accounts, in respect of transactions initiated on or before February 29, 2024, must be completed by March 15, 2024, and no further transactions will be permitted thereafter.

Paytm’s Payments Bank, which commenced operations on May 23, 2017, has faced regulatory scrutiny, and this recent action by the RBI reflects concerns over persistent non-compliances. The move has implications for the functioning of the bank and raises questions about compliance standards in the digital payments and banking sector.

The regulatory action underscores the importance of adherence to compliance and supervisory standards in the financial sector, particularly as digital banking and payments gain prominence in India. The decision by the RBI is expected to have a significant impact on Paytm Payments Bank’s operations and may prompt the broader industry to reevaluate compliance frameworks to ensure the stability and integrity of financial services.