RBI slaps Rs 5.39 cr penalty on Paytm Payments Bank for regulatory violations

Paytm fined: The Reserve Bank of India (RBI) imposed a penalty of Rs 5.39 crore on Paytm Payments Bank for violating Know Your Customer (KYC) norms and various other regulatory guidelines related to cybersecurity and risk profile monitoring. 

This penalty was issued after the RBI identified several major issues during special scrutiny, including failure to identify beneficial owners for payout services, inadequate monitoring of payout transactions, exceeding regulatory balance limits in certain customer accounts, delayed reporting of a cybersecurity incident, and lapses in implementing device binding control measures. Additionally, the bank's video-based customer identification process (V-CIP) infrastructure failed to restrict connections from IP addresses outside India.

The deficiencies in regulatory compliance were revealed after a thorough audit by RBI, focusing on KYC and anti-money laundering (AML) rules. Following the audit, Paytm Payments Bank submitted responses, both written and oral, to the RBI's inquiries, ultimately resulting in the imposition of a monetary penalty.

Paytm Payments Bank under scrutiny

It's worth noting that Paytm Payments Bank was already under RBI's scrutiny and was prohibited from onboarding new customers since March last year due to significant supervisory concerns. However, it remains unclear whether the recent penalty is related to the existing restrictions. Paytm Payments Bank's parent company, One97 Communications, had implemented RBI's recommendations from a prior IT review in its first quarter financial statements for the fiscal year 2023-24.

Despite these challenges, Paytm Payments Bank has introduced new services to retain its existing customer base. The parent company has shown operational metrics, reducing net losses and significantly increasing revenue. 

Founded in 2017, Paytm Payments Bank has become a major player in India's payments banking sector, offering mobile banking and e-wallet services. In 2022, it ranked among the top mobile banking service providers in India and secured the sixth position globally in terms of e-wallet users.

On the stock market, Paytm's shares closed 1.47 per cent lower at Rs 957.60 on the BSE following the announcement of the penalty.