The Reserve Bank of India has cancelled the banking licence issued to Paytm Payments Bank Limited. The RBI cited detrimental management practices and compliance failures as key reasons for this decision. “The bank is not complying with provisions of Section 22 (3) (c) of the BR Act,” stated the RBI.
Paytm Payments Bank is now prohibited from conducting any business effective immediately. The RBI emphasized that the bank has sufficient liquidity to repay its entire deposit liability upon winding up operations.
This action follows years of regulatory scrutiny. Paytm Payments Bank has faced compliance concerns since 2018. The RBI barred the bank from accepting deposits or top-ups in any customer account after February 29, 2024.
The RBI imposed a penalty of Rs 5.39 crore on Paytm Payments Bank in October 2023 for previous violations. It also directed the bank to stop onboarding new customers effective March 11, 2022.
Management practices at Paytm Payments Bank have been under fire. “The general character of the management of the bank is prejudicial to the interest of depositors as also the public interest,” said the RBI.
The RBI will apply to the High Court for winding up procedures. This follows orders from March 2022 and additional restrictions imposed in early 2024.
KYC norms violations were highlighted as a major issue by the RBI. The bank failed to comply with conditions stipulated in its Payments Bank license.
Officials have not confirmed further details on potential next steps for Paytm Payments Bank or its stakeholders, including One97 Communications and Vijay Shekhar Sharma, who holds a majority stake in the bank.
