The Reserve Bank of India has allocated an order to Paytm Payments Bank, instructing it to cease accepting fresh deposits into its accounts and popular digital wallets starting in March. The regulatory body is contemplating the cancellation of the payment bank’s operating license, with a potential decision expected after the February 29 deadline.
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Possible Violations and Regulatory Concerns
Sources reveal that the RBI is evaluating the cancellation due to several violations, including the misuse of customer documentation rules and the non-disclosure of significant transactions. Of particular concern are cases where a single identity document was used to register thousands of customers, and transactions exceeding regulatory limits were conducted in minimum-KYC accounts, raising money-laundering apprehensions.
While no final decision has been reached, the RBI’s stance may evolve based on representations from Paytm. The regulatory body has set a deadline for compliance, and any decision will be made with depositors’ protection in mind.
Paytm’s Response and Compliance Measures
A spokesperson for Paytm Payments Bank acknowledged the recent directive from the central bank, characterizing it as part of the ongoing supervisory engagement and compliance process. The bank emphasized its commitment to adhering to compliance and supervisory instructions from the regulator.
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Background of Regulatory Actions
This development follows the RBI’s suspension of a significant portion of Paytm’s business, causing a stir in India’s finance and tech industries. The central bank’s decision came after multiple warnings issued over the past two years concerning questionable dealings between Paytm’s popular payments app and its lesser-known banking arm.
Potential Implications of License Cancellation
If the RBI proceeds with the cancellation of Paytm Payments Bank’s license, it would be considered a more severe measure than the actions taken earlier in the week. Paytm Payments Bank, operating as a restricted bank that can accept deposits but not lend, is majority-owned by billionaire Vijay Shekhar Sharma, with a 51% stake. At the same time, Paytm parent One 97 Communications Ltd. holds the remaining share. The fate of the banking subsidiary hinges on the resolution of compliance issues and ongoing discussions with the RBI.
Source: HT
