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Paytm Payments Bank to Cease Operations Following RBI Order


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Paytm Payments Bank Ltd (PPBL), the banking subsidiary of Paytm, will cease its services starting from tomorrow (March 15). This decision comes as a result of an order issued by the Reserve Bank of India (RBI) due to violations of Know Your Customer (KYC) norms and ongoing non-compliance issues by PPBL.

Customers will still be able to withdraw or transfer funds from their accounts; however, they will no longer be able to deposit money into their accounts. This closure also impacts Paytm FASTag users, who are advised to acquire a new FASTag.

As a consequence of this closure, the bank accounts of Paytm Payments Bank will no longer receive salary credits, direct benefit transfers, or subsidies. Nevertheless, refunds, cashbacks, and sweep-ins funds from partner banks can still be received. Users will not be able to utilize features such as top-up or money transfer in their account wallets, but they can use any pending balance in their accounts to make payments. Additionally, the pending balance can be utilized to pay for OTT subscriptions.

The National Payments Corporation of India (NPCI) is expected to grant a third-party application provider (TPAP) license to Paytm’s parent company, One 97 Communications, before the bank’s closure on March 15. This license will enable customers to continue using the Paytm app for payments through Unified Payments Interface (UPI), even after the banking arm of Paytm terminates its operations.

The RBI’s decision to close Paytm Payments Bank is a result of ongoing issues of non-compliance. The bank and its parent company have faced scrutiny for the lack of information barriers within the group and data access by China-based entities that indirectly hold stakes in the bank. Furthermore, the bank is said to have opened multiple accounts without proper identification and allowed large deposits. These actions have raised serious concerns about potential illegal activities, including money laundering.

Paytm Payments Bank has been under scrutiny by the RBI since 2018. In June 2018, it was temporarily prohibited from opening new accounts due to violations of licensing requirements. In 2021, the bank was fined Rs. 1 crore for providing false information and for KYC AML (anti-money laundering) violations. By October 2023, due to persistent disregard for KYC regulations, the RBI had fined the company Rs. 5.49 crore, marking its fourth penalty. As a result of repeated violations, the bank has been ordered to cease its operations.

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