Paytm Payments Bank, the payment giant’s division that handles payments for several of its clients, including its own Paytm service, has been asked by India’s RBI to completely halt its business. The Reserve Bank of India (RBI) has imposed major restrictions on Paytm Payments Bank (PPBL), barring the bank from onboarding new customers and accepting deposits, credit transactions, and top-ups in customer accounts, wallets, FASTags, and more, effective from February 29, 2024.
The central bank, invoking its power under Section 35A of the Banking Regulation Act, 1949, directed PPBL to terminate nodal accounts of One97 Communications Ltd and Paytm Payments Services Ltd. at the earliest, not later than February 29, 2024. While certain services will be allowed, including the facility to transfer wallet balance to savings accounts, several banking services will be restricted.
Withdrawal or utilisation of balances by customers from their accounts, including savings bank accounts, current accounts, prepaid instruments, FASTags, and National Common Mobility Cards, will be permitted without any restrictions up to their available balance. However, no further deposits, credit transactions, or top-ups will be allowed after February 29, 2024, except for interest, cashbacks, or refunds that may be credited at any time.
The RBI clarified that settlement of all pipeline transactions and nodal accounts initiated on or before February 29, 2024, shall be completed by March 15, 2024, and no further transactions shall be permitted thereafter.
This move comes almost two years after the RBI directed Paytm Payments Bank to halt new customer onboarding. This, it said, is a result of “persistent” non-compliances and “continued material supervisory concerns” in the bank. Paytm Payments Bank had faced penalties in the past, with a penalty of INR 5.39 Cr imposed in October 2023 for non-compliance with Know Your Customer (KYC) norms.
The restrictions also extend to Paytm’s FASTag services, with the Indian Highways Management Company Ltd (IHMCL) barring the bank from issuing new FASTags. An audit initiated by IHMCL due to customer complaints revealed non-compliance with prescribed parameters outlined in the service-level agreement.
It remains to be seen how Paytm will comply with RBI directives and maintain essential services for its existing customer base.