In a recent development, Paytm Payments Bank, a subsidiary of Paytm, faces significant challenges as the Reserve Bank of India (RBI) has directed the bank to cease accepting new deposits in its accounts and popular wallets after February 29, 2024. This regulatory directive includes restrictions on accepting fresh deposits, facilitating credit transactions, and conducting fund transfers, including Unified Payments Interface (UPI) services beyond the specified date.
Yogesh Dayal, Chief General Manager at RBI, clarified that after February 29, 2024, no additional deposits, credit transactions, or top-ups would be permitted in various customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. However, allowances for interest, cashbacks, or refunds to be credited at any time are exceptions to this restriction.
While customers retain the ability to withdraw or utilize balances from their accounts, including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc., the limitations imposed on Paytm Payments Bank stem from a Comprehensive System Audit report and compliance validation report highlighting persistent non-compliances and supervisory concerns.
The RBI’s decision to impose restrictions on Paytm Payments Bank traces back to its initial instruction in March 2022, directing the bank to cease adding new customers. This recent action is taken under Section 35A of the Banking Regulation Act, 1949.
In response to the RBI’s restrictions, Paytm Payments Bank, an associate of One 97 Communications Limited (OCL), is committed to immediate compliance. The company has outlined plans to expedite its transition to other bank partners, with OCL exclusively collaborating with other banks in the future. Despite the expected impact of ₹300 crore to ₹500 crore on its annual earnings due to the RBI’s order, Paytm remains optimistic about continuing on its trajectory of improving profitability.
Moreover, in the wake of the RBI’s announcement, shares of the fintech company Paytm experienced a significant decline of 20% in pre-open trade on Thursday. This decline brought Paytm’s stock to a six-week low of ₹609, reflecting the market’s reaction to the regulatory actions against Paytm Payments Bank.
