RBI instructs Paytm Payments Bank to discontinue accepting new deposits in its accounts or popular wallets post-February 29, 2024.
The Reserve Bank of India (RBI) issued an order on Wednesday, instructing Paytm Payments Bank to halt the acceptance of fresh deposits in its accounts or popular wallets beyond February 29, 2024.
The regulatory authority informed Paytm Payments Bank, a component of one of India’s major payment companies, Paytm, that it is prohibited from accepting new deposits, facilitating credit transactions, and providing fund transfers, including the Unified Payments Interface (UPI) facility, after February 29.
“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,” Yogesh Dayal, a chief general manager with the central bank, said in a press statement.
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, up to their available balance, the statement added.
The Reason Behind RBI Imposing Restrictions on Paytm Payments Bank?
In March 2022, the RBI directed Paytm Payments Bank to cease adding new customers.
However, based on a Comprehensive System Audit report and the subsequent compliance validation report by external auditors, the RBI identified ongoing non-compliances and significant supervisory concerns within the bank. The RBI, without disclosing specific details, deemed it necessary to implement further supervisory measures.
The central bank added that the action against Paytm Payments Bank was initiated under Section 35A of the Banking Regulation Act, 1949.
Paytm Payments Bank’s response to RBI restrictions.
Paytm Payments Bank, a subsidiary of One 97 Communications Limited (OCL), stated that it is undertaking “immediate steps” to adhere to the RBI’s directives.
Update: Paytm Payments Bank Limited, an associate of Paytm receives RBI directions. Paytm to expand its existing relationships with leading third-party banks to distribute payments and financial services products.
— Paytm (@Paytm) January 31, 2024
Read more here: https://t.co/NsPCOxp6VJ pic.twitter.com/fQjozyR11m
“OCL, as a payments company, works with various banks (not just Paytm Payments Bank), on various payments products, OCL started to work with other banks since starting of the embargo. We now will accelerate the plans and completely move to other bank partners. Going forward, OCL will be working only with other banks, and not with Paytm Payments Bank Limited. The next phase of OCL’s journey is to continue to expand its payments and financial services business, only in partnerships with other banks,” the statement include.
Paytm is expected to incur losses exceeding Rs 500 crore due to the recent regulatory actions taken by the RBI.
Paytm has stated that it anticipates a “worst-case impact” of Rs 300 crore to Rs 500 crore on its annual earnings following the RBI’s directive restricting Paytm Payments Bank from accepting new deposits. Despite this, the company expressed confidence in its ability to “continue on its trajectory” towards enhancing profitability.