The Reserve Bank of India (RBI) has issued a directive to Paytm Payments Bank, a major player in India's payment landscape, instructing it to cease accepting fresh deposits or facilitating credit transactions in its accounts and popular wallets after February 29, 2024. This move comes following persistent non-compliances and supervisory concerns noted by the regulator.
According to Yogesh Dayal, Chief General Manager at RBI, Paytm Payments Bank will be restricted from accepting new deposits, facilitating credit transactions, or offering fund transfers, including the Unified Payments Interface (UPI) facility, post the specified date. The regulator emphasized that no further deposits or credit transactions will be allowed, except for interest, cashbacks, or refunds that may be credited at any time.
While the directive imposes restrictions on fresh deposits, customers are allowed to withdraw or utilize balances from their accounts, including savings bank accounts, prepaid instruments, FASTags, and National Common Mobility Cards, without any restrictions up to their available balance.
The RBI had previously instructed Paytm Payments Bank to stop adding new customers in March 2022. The recent action stems from a Comprehensive System Audit report and compliance validation report by external auditors, revealing persistent non-compliances and material supervisory concerns, prompting further regulatory intervention.
The central bank cited Section 35A of the Banking Regulation Act, 1949, as the legal basis for taking supervisory action against Paytm Payments Bank.
In response to the RBI's directive, Paytm Payments Bank, an associate of One 97 Communications Limited (OCL), expressed its commitment to immediate compliance. The company announced plans to accelerate its transition to other bank partners, stating that OCL will exclusively collaborate with other banks, excluding Paytm Payments Bank Limited, in its payments and financial services endeavors.
Paytm anticipates a "worst-case impact" of ₹300 crore to ₹500 crore on its annual earnings due to the RBI's order restricting new deposits. Despite this setback, the company remains optimistic about improving profitability and continuing its growth trajectory.