RBI banned Paytm payments Banks. India’s central bank, the Reserve Bank of India (RBI), has banned fintech giant Paytm, prohibiting it from providing any form of banking services to its customers or carrying out top-ups on any customer’s accounts, prepaid instruments, wallets, cards for paying road tolls after February 29.
The RBI cited “non-compliance and ongoing material supervisory concerns” at One 97 Communications, the parent company of Paytm, as the reasons behind this decision. The RBI did not leave any window open for the bank to come back from these stringent restrictions. Nothing in the short public press release indicated that Paytm Payments Bank would be allowed to fix its systems, nothing to say that the RBI would consider easing restrictions if the issues were to be fixed.
Paytm further said in the interest of transparency, and protecting its reputation, customers, shareholders, and stakeholders from being influenced by unwarranted and speculative stories, the company has filed this discloser and is exploring all options to ensure that its stakeholders are protected from unwarranted and speculative stories.
Meanwhile, the traders’ body Confederation of All India Traders (CAIT) issued cautionary advice urging Paytm users to switch to other payment apps.
RBI banned Paytm Payments Bank, No ED investigation against the company or CEO
The Enforcement Directorate (ED) is neither investigating owner of Paytm brand- One97 Communications- nor its founder and CEO Vijay Shekhar Sharma for money laundering.
Neither the company nor its founder and CEO are being investigated by the Enforcement Directorate regarding inter alia money laundering”, the company said in an exchange filing.
In the past, certain users on our platforms have been subject to enquiries and on those occasions, we have always cooperated with the authorities,” Paytm said in a regulatory filing.
We have cooperated with the agencies during any investigations by the authorities on any set of merchants or users in the past, it said, adding, “We would like to set the record straight and deny any involvement in anti-money laundering activities. We have and continue to abide by Indian laws and take regulatory orders with utmost seriousness.”
The regulator also found an unusually high number of dormant accounts which are prone to have been used as mule accounts. “Out of about 35 crore wallet accounts Paytm maintains, RBI found as many as 31 crore being inoperative,” said another person directly in the know.
Paytm Payment Bank को RBI ने दिया तगड़ा झटका. Wallet समेत Banking Services पर Banned#PaytmPaymentBank #RBI #BankingService #Paytm pic.twitter.com/wALpqlR8YJ
— Dainik Jagran (@JagranNews) January 31, 2024
There were also concerns relating to money laundering arising from deficiencies in the KYC processes and lack of transaction monitoring system of the bank
What is Paytm and Paytm Payment Bank?
Paytm is an Indian digital wallet and e-commerce platform that provides various services, including mobile recharging, bill payments, online shopping, and more. It was founded in 2010 by Vijay Shekhar Sharma and has since grown to become one of the leading financial technology companies in India.
Paytm started as a mobile wallet service, allowing users to store money digitally and make payments for various services and products.
It expanded its services to include a wide range of payment options, including utility bill payments, mobile and DTH recharge, ticket booking, and online shopping.
Paytm has its own e-commerce platform, where users can buy a variety of products, including electronics, fashion, home goods, and more. It also offers cashback and discounts on various purchases.
Paytm Payments Bank is a subsidiary of Paytm, one of India’s leading digital payment and financial services platforms.
Paytm Payments Bank was officially launched in May 2017. It operates as a separate entity from the main Paytm wallet and e-commerce platform.
Paytm Payments Bank operates on a model where it combines features of a traditional bank with modern technology. It provides banking services primarily through its digital platform.
Paytm Payments Bank offers savings accounts to individuals. Users can open a savings account with minimal documentation through the Paytm app or website.
The bank provides fixed deposit (FD) services with competitive interest rates. Paytm Payments Bank issues debit cards to account holders for transactions and ATM withdrawals.
Users can access their accounts, make transactions, and perform various banking activities through the Paytm app. The Bank offers interest on savings accounts and the rates may vary based on the account balance. It allows users to maintain zero balance accounts.
While Paytm Payments Bank operates independently, users can link their Paytm wallets with their Payments Bank accounts. This integration allows for seamless fund transfers between the wallet and the bank account.
The Bank may offer insurance and investment products to its customers, providing them with additional financial services. The bank has collaborated with various financial institutions and service providers to enhance its offerings and provide a comprehensive range of services.