The Reserve Bank of India (RBI) is contemplating the cancellation of Paytm Payments Bank’s operating license, as per sources familiar with the matter. The potential action may take place next month, with the RBI ensuring the protection of depositors.
Deadline and Restrictions
The RBI has set a deadline of February 29, after which Paytm Payments Bank may prohibit customers from adding funds to their savings accounts or the digital payment wallet.
Alleged Violations and Concerns
Sources indicate that the RBI is considering this drastic step due to violations, including the misuse of customer documentation rules and non-disclosure of material transactions. There are concerns about Paytm Payments Bank customers not submitting know-your-customer (KYC) documentation, the use of a single identity document for thousands of registrations, and transactions surpassing regulatory limits in minimum-KYC accounts, raising money-laundering concerns.
Paytm’s Response and Regulatory Compliance
A spokesperson for Paytm Bank stated that the recent directive from the RBI is part of the ongoing supervisory engagement and compliance process. The bank acknowledges compliance with regulatory instructions and supervision.
Unprecedented Suspension and Previous Warnings
The RBI’s potential decision to cancel Paytm Payments Bank’s license follows the recent suspension of much of Paytm’s business, surprising the finance and tech industries. Earlier warnings were issued over the past two years regarding questionable dealings between Paytm’s popular payments app and its lesser-known banking arm.
Ownership Structure
Paytm Payments Bank operates as a restricted bank, able to take deposits but not lend. Billionaire Vijay Shekhar Sharma holds a 51% stake in the bank, with Paytm parent One 97 Communications Ltd. owning the remaining stake. The final decision on the license cancellation is yet to be reached, and the RBI’s stance may evolve based on Paytm’s representations. The central bank did not respond to requests for comment.
