Paytm Payments Bank Denies Report Claiming Data Leak To China, Says Fully Compliant With RBI Rules

Paytm Payments Bank: Paytm Payments Bank will be allowed to add new customers only after reviewing the central bank's IT audit reports.

Indian cellphone-based digital payment platform Paytm (AFP photo)

New Delhi: After the RBI directed it to stop opening new accounts, Paytm Payments Bank said on Monday that a report claiming it had leaked data to Chinese firms was "false and sensationalist". Paytm Payments Bank said it was fully compliant with the data localisation rules of the RBI and the entire data of the bank resides in the country.

Last week, the RBI directed Vijay Shekhar Sharma- promoted Paytm Payments Bank Ltd (PPBL) to stop opening new accounts amid "material supervisory concerns" observed in the bank.

A recent Bloomberg report claiming data leak to Chinese firms is false and sensationalist.

Paytm Payments Bank is proud to be a completely homegrown bank, fully compliant with RBI’s directions on data localisation. All of the Bank’s data resides within India.

— Paytm Payments Bank (@PaytmBank) March 14, 2022

Paytm Payments Bank said that this moratorium will not affect any existing customers of Payments Bank. However, users cannot sign up for Payments Bank's service until further notice. Meanwhile, existing customers can continue to transact on the Paytm platform.

"All of the Bank's data resides within the country. We are true believers of the Digital India initiative, and remain committed to driving financial inclusion in the country," PPBL said in a statement as quoted by news agency PTI.

The Reserve Bank of India (RBI) has ordered an IT audit of Paytm Payments Bank. IT audit means that the company's IT infrastructure i.e. software is capable of bearing the burden of many customers, what are the flaws in it and why they are coming, all these will be investigated.

According to the statement issued by RBI, Paytm Payments Bank will have to first take RBI's permission to add new customers, then it can add new customers with itself. The bank will be allowed to add new customers only after reviewing the central bank's IT audit reports.

"The bank has also been directed to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system. Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing report of the IT auditors," RBI said as quoted by news agency ANI.

Shares of the parent organization of PPBL, One97 Communications, were hammered on BSE and National Stock Exchange after a report asserted that Paytm Payments Bank Ltd's servers were offering data to China-based entities that indirectly own a stake in Paytm Payments Bank.

The organization has dismissed the report.

The founder and chief executive officer of financial technology company Paytm, Vijay Shekhar Sharma, holds 51% stake in Paytm Payments Bank (PPBL), while the remaining 49% is held by One97 Communications.

China-based Alibaba group is the biggest investor in One97 Communications with around 31% stake through its subsidiaries.

Shares of One97 Communications declined by 12.84 percent to settle at Rs 675.35. On NSE, the stock tumbled 12.21 percent to close at Rs 680.40.

(With PTI inputs)