RBI clamps down on Paytm payments bank amid regulatory concerns | Fusion - WeRIndia

In a significant regulatory move, the Reserve Bank of India (RBI) has imposed stringent restrictions on Paytm Payments Bank Ltd., highlighting serious compliance issues.

Effective February 29, 2024, the bank is prohibited from accepting new deposits or conducting credit transactions.

This decision follows the RBI’s comprehensive system audit, which uncovered persistent non-compliance and supervisory concerns within the bank.

Customers, however, are not left in the lurch. They can continue to use the funds in their accounts, including savings and current accounts, prepaid instruments, FASTags, and National Common Mobility Cards (NCMC), without restrictions.

Yet, after February 29, the bank must cease additional banking services. This includes fund transfers through any means like AEPS, IMPS, etc., BBPOU, and UPI facilities.

In a preceding move on March 11, the RBI barred the bank from onboarding new customers.

This was an early indicator of the central bank’s growing concerns about the bank’s operational integrity.

The latest order further tightens the screws by mandating the termination of Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd. These accounts must be closed by February 29, 2024.

The RBI’s directive also includes a strict timeline for settling all pipeline transactions and nodal accounts, with a final deadline of March 15, 2024. Post this date, no further transactions will be permitted, ensuring a clear cutoff for the bank’s restricted operations.

This crackdown significantly impacts Paytm Payments Bank’s operational capabilities. However, it’s important to note that this order does not affect Paytm’s Unified Payment Interface (UPI) arm.

Therefore, customers can still use Paytm for digital payments, as long as their accounts are linked to an external bank.

This regulatory action comes amid a broader shift within One97 Communications.

In December, the parent company laid off hundreds of employees, turning to Artificial Intelligence (AI) to automate processes and cut costs.

The move towards AI was aimed at enhancing efficiency and reducing redundant tasks, aligning with the firm’s strategy to optimize operations in the face of regulatory challenges.

The RBI’s stringent stance underscores its commitment to ensuring compliance and stability in India’s rapidly evolving digital banking landscape.

As the situation unfolds, Paytm Payments Bank will need to navigate these regulatory waters carefully to regain full operational capacity.

Image Credit: Anurag Vijay 03, CC BY-SA 4.0, via Wikimedia Commons

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