RBI Directs Paytm Payments Bank to Halt New Customer Onboarding

The Reserve Bank of India, in exercise of its powers under section 35A of the Banking Regulation Act, 1949, has directed Paytm Payments Bank Ltd (PPBL or the bank) to stop onboarding of new customers with immediate effect.

The Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action.

Accordingly, in exercise of its powers under section 35A of Banking Regulation Act, 1949 and all other powers enabling it in that behalf, the Reserve Bank of India, has today directed PPBL as below:

i) No further deposits or credit transactions or top ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime.

ii) Withdrawal or utilisation of balances by its customers from their accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc. are to be permitted without any restrictions, upto their available balance.

iii) No other banking services, other than those referred in (ii) above, like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc.), BBPOU and UPI facility should be provided by the bank after February 29, 2024.

iv) The Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd. are to be terminated at the earliest, in any case not later than February 29, 2024.

v) Settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024 and no further transactions shall be permitted thereafter.

Meanwhile, reacting to this, Member of Parliament and General Secretary in-charge Communications, Indian National Congress, Jairam Ramesh said, “The last 10 years under Prime Minister Narendra Modi have brought only chaos to the banking system. First, the disastrous demonetisation decision, taken without any planning and over objections of the RBI.  Then, bankruptcy of IL&FS in 2018 hit the NBFC sector. Thousands of crores of scams were done at Yes Bank and DHFL in 2018 as well. Lakshmi Vilas Bank and PMC Bank failed as well. The Nirav Modi types got a free visa to abscond with public money. It is ordinary Indians who have been left unable to withdraw their savings.”

Now, the RBI has issued an order to stop all services at PayTM Payments Bank. This order will, as usual, hit ordinary Indians the most, stated Jairam Ramesh in a statement.

“Why has a firm with Chinese links — at one point with 31% Chinese ownership and Chinese investment of more than Rs 7000 crore—which has previously been penalised by the RBI for noncompliance in 2022, not been kept under stricter monitoring? Does this have anything to do with PayTM’s vocal support on November 9, 2016 of the disastrous demonetisation decision?” the Congress leader questioned further.

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