RBI Imposed Restrictions on Paytm Payments Bank  and ordered to wrap up  all operations by March 15 due to continuous non-compliance

The Reserve Bank of India (RBI) instructed Paytm Payments Bank to cease accepting new deposits in its accounts or popular wallets after February 29, 2024.

The regulator conveyed to Paytm Payments Bank, a part of one of India’s largest payment firms, that it won’t be permitted to receive fresh deposits, facilitate credit transactions, or provide fund transfers, including Unified Payments Interface (UPI) services after February 29.

According to Yogesh Dayal, a chief general manager with the central bank, “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.”

Customers can freely withdraw or use balances from their accounts, including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc., without any restrictions, up to their available balance, the statement mentioned.

What led RBI to impose restrictions on Paytm Payments Bank?

In March 2022, RBI directed Paytm Payments Bank to halt new customer additions. Despite this, a subsequent audit and compliance report by external auditors uncovered ongoing non-compliances and significant supervisory concerns, leading to further regulatory measures.

The RBI, without providing specific details, stated that the action against Paytm Payments Bank was executed under Section 35A of the Banking Regulation Act, 1949

Paytm Payments Bank’s Response to RBI’s Restrictions

Paytm Payments Bank, affiliated with One 97 Communications Limited (OCL), stated that it is promptly taking measures to adhere to the RBI’s directives.

As a payments company, OCL collaborates with multiple banks, not limited to Paytm Payments Bank, for various payment products, the fintech company mentioned in a statement on Thursday. The statement conveyed, “We will now expedite the plans and fully transition to other bank partners. Moving forward, OCL will exclusively collaborate with other banks and not with Paytm Payments Bank Limited. The next phase of OCL’s journey is to continue expanding its payments and financial services business, solely in partnerships with other banks.”

RBI authorities announced that Paytm Payments Bank Ltd (PPBL) must adhere to the following directives immediately:

1. Starting from February 29, Paytm Payments Bank will cease to register new users. This implies that if you are not already a Paytm user, you won’t be able to create a new account on the platform after the specified date. For existing users, the use of Paytm wallets, Paytm Fastags, or Mobility Cards will no longer be available. Mobility cards serve as transit cards applicable for various payments such as shopping bills, parking fees, ATM withdrawals, metro and bus rides, fuel or food bills, and more.
2. Starting February 29, Paytm will no longer accept new deposits. Therefore, if you wish to add funds to your Paytm Payments Bank, you can only do so until the end of February. After that date, you won’t be able to deposit any money into the savings account. Despite this, OCL reassures that services like insurance distribution and loans will remain unaffected by this change. Paytm states, “OCL’s other financial services such as loan distribution, insurance distribution, and equity broking are not in any way related to Paytm Payments Bank Limited and are expected to be unaffected by this direction.
3. The central bank specified that no debit or credit transactions, including wallet transactions, will be allowed. However, customers can freely withdraw without any restrictions, as announced. In essence, you won’t be able to send or receive money, but you can access and withdraw the existing balance in your Paytm account.
4. The Reserve Bank of India has directed that, starting February 29, the bank must refrain from providing additional services like fund transfers (including AEPS, IMPS, etc.), bill payments, or UPI facilities. This implies that you won’t be able to conduct money transfers, bill payments, or UPI transactions using Paytm services after the specified date.
5. Just to clarify, this action is focused on Paytm’s banking operations, and it doesn’t specify if transactions made through external banks will also be impacted. This suggests that you might still be able to make UPI payments through Paytm if it’s linked to an external account. However, since the Paytm Wallet is powered by Paytm Payments Bank, you may still not have access to use the Paytm Wallet.

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