The Reserve Bank of India (RBI) has issued a directive to Paytm Payments Bank Ltd (PPBL) to stop all deposits and credit transactions after February 29, 2024, due to persistent non-compliances and supervisory concerns. However, this does not affect the Paytm app, which is a separate entity and will continue to function normally.
What is Paytm Payments Bank?
Paytm Payments Bank is a subsidiary of One97 Communications Ltd, the parent company of Paytm. It was launched in 2017 as a digital-only bank that offers savings and current accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards (NCMC), etc. It also acts as a business correspondent for other banks and provides fund transfer services like AEPS, IMPS, BBPOU and UPI.
What are the RBI directives?
The RBI has directed PPBL to stop onboarding new customers with immediate effect and to stop accepting any deposits or credit transactions or top ups in any customer accounts after February 29, 2024. The customers can withdraw or use their existing balances without any restrictions. The bank is also prohibited from providing any other banking services like fund transfers or UPI facility after February 29, 2024. The nodal accounts of One97 Communications Ltd and Paytm Payments Services Ltd are to be terminated by February 29, 2024 and all pipeline transactions are to be settled by March 15, 2024.
Why did the RBI take this action?
The RBI has taken this action under section 35A of the Banking Regulation Act, 1949, which empowers it to issue directions to banks in the interest of public interest, banking policy or depositors’ interest. The RBI had earlier directed PPBL to stop onboarding new customers in March 2022, after finding deficiencies in its compliance with regulatory norms. The subsequent system audit report and compliance validation report revealed that the bank had not rectified the issues and continued to have material supervisory concerns.
How will this affect the customers?
The customers of PPBL will not be able to deposit any money or receive any credit in their accounts after February 29, 2024. They will also not be able to use their prepaid instruments, wallets, FASTags or NCMC cards for any transactions after that date. However, they can withdraw or spend their existing balances without any restrictions. They can also transfer their funds to other banks or service providers before February 29, 2024.
How will this affect the Paytm app?
The Paytm app is not affected by the RBI directive as it is a separate entity from PPBL. The app is a fintech platform that offers various services like payments, commerce, gaming, wealth management, etc. The app users can continue to use their Paytm wallets or UPI for making payments or receiving money. The app also supports other payment methods like debit cards, credit cards, net banking, etc.
What is the future of PPBL?
PPBL has said that it is working closely with the RBI to resolve the issues and resume its operations as soon as possible. It has also assured its customers that their money is safe and secure with the bank. PPBL has said that it is committed to providing innovative and inclusive banking services to its customers.