RBI Asks Paytm Payments Bank To Stop Onboarding New Customers With Immediate Effect

The RBI's action against Paytm Payments Bank follows a comprehensive system audit report and subsequent compliance validation report of the external auditors

The RBI also barred Paytm Payments Bank from accepting deposits or top-ups in any customer account, prepaid instruments, wallets, and FASTags, among others after February 29,

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The Reserve Bank of India (RBI) on Wednesday restricted Paytm Payments Bank from onboarding new customers with immediate effect. In a release on Wednesday, the central bank also barred Paytm Payments Bank from accepting deposits or top-ups in any customer account, prepaid instruments, wallets, and FASTags, among others after February 29, 2024.

The RBI's action against the fintech firm follows a comprehensive system audit report and subsequent compliance validation report of the external auditors.

As per the release, the RBI said withdrawal or utilisation of balances by its customers from their accounts, including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc. are to be permitted without any restrictions, upto their available balance. 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 Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd. are to be terminated at the earliest, in any case not later than February 29, 2024. Settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024 and no further transactions shall be permitted thereafter.

Earlier in October last year, the RBI imposed a penalty of Rs 5.39 crore on Paytm Payments Bank Ltd for non-compliance with certain provisions, including Know Your Customer (KYC) norms. The central bank also found non-compliance with certain provisions related to 'RBI Guidelines for Licensing of Payments Banks', 'Cyber security framework in banks' and 'Securing mobile banking applications including UPI ecosystem'.

A special scrutiny from KYC/AML (Anti Money Laundering) perspective of the bank was conducted and a comprehensive system audit of the bank was conducted by auditors identified by RBI, according to an official statement. After examination of the reports, RBI in the statement said it found that Paytm Payments Bank failed to identify beneficial owner in respect of entities onboarded for providing payout services.