RBI Bars Paytm Payments Bank From Onboarding New Customers

The central bank has also directed Paytm Payments Bank to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system with immediate effect

In December last year, Paytm Payments Bank had received the RBI’s approval to operate as a scheduled payments bank, helping it to expand its financial services operations. Image: Getty

New Delhi: The Reserve Bank of India (RBI) on Friday directed Paytm Payments Bank to stop from acquiring new customers with immediate effect because of certain supervisory concerns.

According to the RBI circular, the central bank under under Section 35A of the Banking Regulation Act, 1949, barred Paytm Payments Bank from acquiring new customers and directed the bank 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 a report of the IT auditors," the central bank said.

Action against Paytm Payments Bank Ltd under section 35 A of the Banking Regulation Act, 1949https://t.co/tqWfwt7mT3

— ReserveBankOfIndia (@RBI) March 11, 2022

“This action is based on certain material supervisory concerns observed in the bank," the RBI said in a statement.

Founder and CEO of Paytm Vijay Shekhar Sharma and and One97 Communications Limited own Paytm Payments Bank, which has over 5.8 crores account holders. Sharma is also the chairman of Paytm Payments Bank.

In December last year, Paytm Payments Bank, an associate entity of Paytm, had received the RBI’s approval to operate as a scheduled payments bank, helping it to expand its financial services operations.

Earlier, Paytm Payments Bank had said it received over 92.6 crore UPI transactions in December, becoming the first beneficiary bank in the country to achieve this landmark.

According to reports, Paytm Payments Bank had 6.4 million savings accounts as of March 31, 2021 and over Rs 5,200 crore in deposits. It was also the largest UPI beneficiary bank, with the lowest technical decline rate among beneficiary and remitter banks.