The Reserve Bank of India issued new curbs against Paytm’s Payments Bank, which processes transactions for financial services giant Paytm, barring it from offering many banking services including accepting fresh deposits and credit transactions across its services.
Wednesday’s move, which goes into effect February 29, follows the Indian central bank ordering Paytm Payments Bank to stop accepting new customer accounts in 2022, a curb it maintains. RBI said a comprehensive audit by external auditors found “persistent” non-compliances and “continued material supervisory concerns” in the bank. The non-compliance, RBI said, warranted “further supervisory action.”
One97 Communications, the parent firm of Paytm, owns a 49% stake in Payment Payments Bank. A payments bank license allows the holder to offer a number of banking services, though some restrictions are in place.
The RBI also directed One97 Communications and Paytm Payments Services to terminate their nodal accounts “at the earliest.” Without the nodal account, Paytm will likely have to move many of its businesses to other banks, according to preliminary assessment by industry executives.
“Settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024 and no further transactions shall be permitted thereafter,” RBI added.
Customers can continue to withdraw and utilize money from their accounts, RBI said. Paytm Payments Bank will also not be allowed to offer credit transactions, including via wallets, RBI said.
In 2022, RBI slapped Paytm Payments Bank with penalties after finding that the Noida-headquartered firm had violated rules by allowing data to flow to servers outside of India and didn’t properly verify its customers.
More to follow.
