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Updated February 2nd, 2024 at 09:43 IST

RBI Bars Paytm Payments Bank From Deposits, Credit Transactions

RBI had directed the Vijay Shekhar Sharma-led entity to stop customer onboarding in March 11, 2022 with immediate effect.

Gauri Joshi
Paytm
Paytm | Image:Republic Business
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The Reserve Bank of India has barred Paytm Payments Bank from deposits, credit transactions and top-ups on the platform.

The announcement follows the Central Bank's restrictions on onboarding new customers on March 11, 2022.

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In the notification on Wednesday, RBI said, “No further deposits, 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.”

The announcement is likely to affect 30 crore wallet holders and 3 crore bank accounts. The company had registered 5 crore account holders in 2019.

The action comes after RBI took cognisance of Paytm not complying with the 2022 directive, as per a “Comprehensive System Audit report” followed by a compliance validation report of external auditors.

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Any transactions such as withdrawal or using available balance will be permitted up to the balance available, the bank further mandated, adding that accounts include savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc.

The bank will also lose the right to provide UPI (Unified Payments Interface), fund transfers including AEPS and IMPS as well as Bharat Bill Payment Operating Unit (BBPOU) on the last day of February.  

“The Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd. are to be terminated at the earliest, in any case not later than February 29, 2024,” RBI further mandated.

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The settlement of all transactions in the pipeline, and nodal accounts transacting on or before the February 29 deadline will be completed by March 15, 2024.

“No further transactions shall be permitted thereafter,” RBI said.

On January 29, the Indian Highways Management Company (IHMCL) had barred the bank from issuing fresh FASTags.

Paytm has been a pioneer in fintech, especially after demonetisation for a cashless economy. Riding on the Digital Public Infrastructure (DPI), the listed fintech forayed into partnerships expanding into e-commerce with the Open Network for Digital Commerce (ONDC).  

Vijay Shekhar Sharma, founder of the company listed as One 97 Communications has time and again advocated for relaxed regulations and more autonomy for startups in multiple forums. He is a ‘Part-time Chairman’ for the company, as per records.

The payments bank was inaugurated in 2017 by former Finance Minister Arun Jaitley, with the first branch opened in Noida. It offers net banking as well as extended services from IMPS to RTGS, UPI and FASTag. The bank was fast to launch physical debit cards in 2018, following a facility for current accounts in 2019. 

Incidentally, the bank won the RBI Asia Truly Digital Bank Award that same year. Its journey has not been updated since 2021, but the bank offered physical as well as video KYC for new onboarding. In 2020, the bank chieved Rs 1,000 crore in Fixed Deposits (FD).  

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Published January 31st, 2024 at 17:21 IST

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