New Delhi: Citing “persistent non-compliances” by and “continued material supervisory concerns” regarding the Paytm Payments Bank, the Reserve Bank of India (RBI) has directed the bank to stop allowing deposits into customers’ accounts after February 29.
In a press release on Wednesday (January 31), the RBI said it also directed the bank to stop accepting deposits into prepaid instruments, wallets and FASTags after February 29, though it allowed the bank to credit interests, cashbacks and refunds.
It allowed customers to withdraw and utilise their balances held with the bank.
Paytm’s bank has also been prohibited from providing Unified Payment Interface (UPI) facilities after February 29, the RBI said.
It added that the nodal accounts of One97 Communications Limited, which is Paytm’s parent company, and of Paytm Payments Services “are to be terminated at the earliest, in any case not later than February 29”.
In March 2022, the RBI directed the bank to stop onboarding new customers and to appoint an IT audit firm to “conduct a comprehensive system audit of its IT system”.
On Wednesday, the central bank said that a system audit report as well as a subsequent compliance validation report by an external auditor “revealed persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action”.
The RBI did not divulge the details of the non-compliance or its concerns regarding the payments bank.
In both cases, the RBI invoked section 35A of the 1949 Banking Regulation Act, which gives it powers to issue directions to banking companies in certain situations.
Brokerage firm Bernstein said in a note on Wednesday that “for all practical purposes, the above notifications [by the RBI] end the operations of Paytm Payments Bank,” Reuters reported.
Technology news website TechCrunch cited industry executives as saying that without the nodal accounts, Paytm would have to move many of its businesses to other banks.