In a significant development, the Reserve Bank of India (RBI) has imposed restrictions on Paytm Payments Bank, barring them from onboarding new customers and processing top-ups for wallets, FASTags, and other prepaid instruments starting February 29, 2024.
Key restrictions:
- No new account opening: Aspiring Paytm Payments Bank customers will be unable to create new accounts after February 29th.
- Top-up freeze: Existing customers cannot add money to their wallets, FASTags, or other prepaid instruments offered by the bank.
- Wallet limitations: Transactions using existing wallet balances will continue, but no new funds can be added.
- FASTag impact: Existing FASTags linked to Paytm Payments Bank accounts will remain functional, but users won’t be able to recharge them.
Reasons behind the curbs:
While the RBI hasn’t publicly disclosed the specific reasons, media reports suggest concerns regarding “certain supervisory concerns” and “material deficiencies in regulatory compliance.” Paytm Payments Bank is reportedly cooperating with the RBI to address these issues.
The external auditors’ Comprehensive System Audit report and subsequent compliance validation report revealed persistent non-compliance and continued material supervisory concerns in the bank, warranting further supervisory action, according to the RBI.
What it means for existing customers:
Existing Paytm Payments Bank customers can continue using their accounts for transactions using existing balances. However, they cannot add new funds, create new FASTags, or open new accounts.
Paytm Payments Bank has been instructed that it will not be permitted to accept any further deposits, credit transactions, or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc., after February 29, 2024. However, they may still credit interest, cashback, or refunds at any time.
Impact on Paytm:
This move deals a blow to Paytm’s ambitious financial services expansion plans. The company has yet to issue an official statement, but the restrictions are likely to impact its customer base and overall growth.
“No other banking services, other than those referred in (ii) above, like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc.), BBPOU, and UPI facility should be provided by the bank after February 29, 2024,” the release notes.
The Reserve Bank of India (RBI) has stated that the nodal accounts of One97 Communications and Paytm Payments Services Ltd. must be terminated as soon as possible, but no later than February 29, 2024. Additionally, all pipeline transactions and nodal accounts (related to transactions initiated on or before February 29, 2024) must be settled by March 15, 2024. No further transactions will be allowed after this date.
Looking ahead:
The RBI’s action highlights its focus on ensuring regulatory compliance within the financial sector. Paytm Payments Bank will need to address the concerns raised by the RBI to resume normal operations and onboard new customers.