RBI Imposes Additional Restrictions on Paytm Payments Bank Due to Non-Compliances

The Reserve Bank of India (RBI) has imposed additional restrictions on Paytm Payments Bank (PPBL) due to persistent non-compliances. RBI’s comprehensive system audit and subsequent compliance validation report revealed material supervisory concerns in the bank, leading to further supervisory action.

In March 2022, PPBL was directed to stop onboarding new customers. Now, RBI has restricted PPBL from accepting fresh deposits and credit transactions across its services. The bank will not be allowed to accept deposits or undertake credit transactions or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, and National Common Mobility Cards from March 2024.

Additionally, PPBL will need to terminate the nodal accounts of its parent company One97 Communications and Paytm Payments Services by February 2024. It must also complete the settlement of all pipeline transactions and nodal accounts by March 2024.

Paytm Payments Bank, which started operations in May 2017, originally held the prepaid payments instruments (PPI) license, which was later transferred from the parent company. The new restrictions mean that Paytm will not be able to perform any payment-related transactions, including UPI, even beyond the payments bank.

Customers have expressed concerns regarding their wallet balances, fixed and savings deposits, and the ability to use Paytm for UPI transactions. Paytm had a market share of 13% in terms of UPI transaction volumes and 11% in terms of the value of UPI transactions as of October 2023, according to NPCI data.