The Reserve Bank of India, on Wednesday, told the Delhi High Court that a Public Interest Litigation (PIL) cannot be used as a weapon to challenge the financial or economic decisions taken by the government or the RBI. It came as a response to a PIL that was filed against PayTm, alleging that the online payments portal was providing lending facilities in violation of the law regulating such activity.

PIL said Paytm was violating laws

The petition that was filed by Abhijit Mishra, a financial economist, claimed that Paytm Payments Bank Ltd's 'postpaid' service was operating contrary to the existing law and guidelines regulating such entities. It also stated that RBI's guidelines for payments banks, like Paytm, do not permit credit or loan disbursement activities by such entities.

In the affidavit that was filed by RBI before a bench of Chief Justice D N Patel and Justice C Hari Shankar and has been listed for further hearing on September 18, said that section 22 of the Banking Regulation Act empowers the RBI to issue banking licence to a company to carry on banking business in India, subject to certain conditions provided in this provision.

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"Upon an application made in this behalf by respondent 2 (Paytm), a licence to carry on banking business in the style of a 'payments bank' has been issued by the RBI subject to certain conditions enumerated in the licence itself. These conditions along with the operating guidelines issued by the RBI, specify the broad contours within which a payments bank is required to operate, strictly adhering to the same," it said.

While seeking dismissal of the plea, the central bank said that even though Mishra has sought the relief against Paytm but he has made RBI the first party as he might be aware that a PIL would not lie against a private body. It also said that he is indirectly attempting to misguide the c.

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"For initiating action under the relevant provisions of the BR Act, RBI has to satisfy that Paytm has acted in such a manner which is detrimental to the interests of the depositors. No action can be initiated solely on the baseless allegation of the petitioner. Hence, no relief should be granted to him," RBI said in its affidavit.

Paytm also opposed the petition claiming that the plea was based on incorrect facts and misguided understanding of law. In its response, the company said that the Paytm application is owned by One97 Communications Ltd which is engaged in the business of providing payment solutions, providing services related to electronic payments and selling of digital goods.

It also said that Paytm Payments Bank Ltd does not own or operate the Paytm application and only uses the technology and platform services of the application according to a service agreement with One97 which owns the application.

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The company gave a befitting reply to the PIL

The company cleared the air around Paytm’s postpaid which is a credit facility available to the customers by saying that the facility is being provided by Clix Finance India which is an NBFC and is in the business of providing loans/ credit facility.

"Paytm Payments Bank Ltd and Clix have an arrangement for sharing of C-KYC Identifier of customer only after explicit consent being provided by the customer," it said.

The affidavit added that Paytm Payments Bank Ltd shares only the KYC Id (Know Your Customer identity) with Clix and not any personal or sensitive information of the customers.

"On availing the Paytm postpaid facility the disbursed amount is not credited to the customers wallet or bank account but it gets reflected in the loan books of Clix as it is a facility being provided by Clix to its customers. This is explicitly clear that Paytm Payments Bank Ltd is not providing any credit facilities/ loans to its customers," it said.

The petition, filed through advocate Payal Bahl, also claimed, "the Paytm Payments Bank Ltd has been lending to the customers through its Paytm Post Paid, thereby it is clear violation of the guidelines that prohibit lending by the payments bank." It has further asked RBI "to take appropriate punitive actions against the Paytm Payments Bank Limited". It has also alleged that Paytm's 'postpaid' service is sharing personal information, like Aadhaar and PAN, of customers with third parties.

The petition has also claimed that any new product launched by the payments bank needs prior approval of RBI, but in this case, the central bank was not informed by Paytm about its 'postpaid' service.

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As part of the Paytm postpaid facility, customers can recharge mobiles, book movie and travel tickets and also shop on Paytm They can also pay the following month at zero cost or with interest.

Apart from seeking punitive action against the company, the petition has also sought directions to RBI to appoint or depute one of its senior officials to the company's board "to overlook audit of operations and regulatory compliance".

The plea has also sought an investigation "against the directors, management, and officers of the Paytm Payments Bank Ltd for alleged malpractice and violation of provision of Article 21 of the Indian Constitution, Banking Regulations Act, Payments and Settlements Act, and other relevant banking acts".

It has further sought directions to transfer all the profits earned from the Paytm 'postpaid' service to the Prime Minister's Relief Fund for the welfare of the nation.

(With inputs from PTI)