Paytm Payments Bank barred from onboarding new customers; no top-ups, wallets, FASTags from Feb 29

In a major blow to Paytm Payments Bank Ltd (PPBL), the Reserve Bank of India (RBI) on Wednesday imposed business restrictions on the payment services arm of One97 Communications, including accepting deposits or allowing credit transactions. This is the second time action has been taken against Paytm Payments Bank after March 2022, when it was asked to stop onboarding new customers. Ahead of the RBI notification, shares of One97 Communications, parent of Paytm, ended flat at ₹761 per share on the BSE.

The central bank today notified that it has directed PPBL to stop onboarding of new customers with “immediate effect”. The restrictions were imposed after a report of the external auditors revealed "persistent non-compliances and continued material supervisory concerns" in the bank.  

“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,” the RBI says.

It adds that  Paytm Payments Bank  will be not allowed to take further deposits or credit transactions or top ups 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.

However, 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. will be permitted without any restrictions, up to their available balance.

“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,” the release notes.

The RBI says the nodal accounts of One97 Communications and Paytm Payments Services Ltd. have to be terminated at the earliest, in any case not later than February 29, 2024. The settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) has to be completed by March 15, 2024 and no further transactions shall be permitted thereafter, it adds.

In March 2022, the RBI had imposed restrictions on Paytm Payments Bank and had directed it to appoint an IT audit firm to conduct a comprehensive system audit of its IT system. In an earlier action on October 20, 2021, RBI had imposed a monetary penalty of ₹1 crore on the bank for violation of Payment and Settlement Systems Act, 2007. On examination of PPBL’s application for issue of final certificate of authorisation (CoA), it was observed that PPBL had submitted information which did not reflect the factual position, RBI had noted in the order.