The Reserve Bank of India, in exercise of its powers under section 35A of the Banking Regulation Act, 1949, had directed Paytm Payments Bank Ltd (PPBL or the bank) to stop onboarding of new customers with immediate effect.
The Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non compliances and continued material supervisory concerns in the bank, warranting further supervisory action.
Accordingly, in exercise of its powers under section 35A of Banking Regulation Act, 1949 and all other powers enabling it in that behalf, the Reserve Bank of India, has today directed PPBL as below:
1. No further deposits or credit transactions or top ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime.
2. Withdrawal or utilisation of balances by its customers from their accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc. are to be permitted without any restrictions, upto their available balance.
3. No other banking services, other than those referred in (ii) above, like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc.), BBPOU and UPI facility should be provided by the bank after February 29, 2024.
4. The Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd. are to be terminated at the earliest, in any case not later than February 29, 2024.
5. Settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024 and no further transactions shall be permitted thereafter.
This is huge, in other words, all banking services available on Paytm, such as bill payment, UPI, wallet, etc., will not be available after February 29, 2024. If you have Paytm FASTag balance, wallet balance, fuel wallet balance or Paytm Payment Bank balance, you can transfer or use them even after February 29, 2024, but fresh credit or wallet/FASTag recharge will not be permitted.
Paytm is in real trouble now. Let's see how Paytm responds to this problem and how they overcome it.
Update (1st Feb, 2024):
Paytm, in its mandatory disclosure under Regulation 30 of SEBI on February 1, 2024, mentioned that One 97 Communications Limited (OCL), a payment company working with various banks, including Paytm Payments Bank Limited (“PPBL”), will now exclusively collaborate with other banks. In the next phase of OCL’s journey, it aims to expand its payments and financial services business through partnerships with different banks.
The Paytm Payment Gateway business for online merchants will continue providing payment solutions to existing merchants. OCL’s offline merchant payment network offerings, such as Paytm QR, Paytm Soundbox, and Paytm Card Machine, will also continue as usual, allowing onboarding of new offline merchants.
Regarding the termination of the nodal account of OCL and Paytm Payments Services Limited (PPSL) by February 29, 2024, both entities will transition the nodal account to other banks during this period. OCL plans to establish partnerships with various other banks to offer diverse payment products to its customers.
OCL’s additional financial services, including loan distribution, insurance distribution, and equity broking, are not directly associated with Paytm Payments Bank Limited and are expected to remain unaffected by this direction.
It appears that Paytm will continue to offer UPI and bill payment services through collaborations with other banks. They already started selling fastag from HDFC Bank. Further developments are anticipated, and we await more clarity on the situation in the coming days.
Official document link (attached): https://www.bseindia.com/xml-data/corpfiling/AttachLive/02a4a3a1-8cc0-4cde-a35f-d4f70ca98377.pdf
Update (2nd Feb, 2024):
According to some media reports, this could mark the end of the giant. In an exclusive interview with CNBC-TV18, former Executive Director of RBI, Deepali Pant Joshi, shared her perspective on the matter, referring to it as a "disaster that had been in the making since October 2023." Joshi highlighted Paytm's nonchalant attitude towards the reasons behind the ₹5.39 crore fine imposed in October 2023.
For the full interview, you can visit: CNBCTV18 Interview
It appears that Paytm was too casual about its KYC norms. On Twitter, particularly among some fintech founders, there is support for Paytm, with claims that RBI is anti-fintech and unjustly treating Paytm. But the real picture is bit different.
The Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non compliances and continued material supervisory concerns in the bank, warranting further supervisory action.
Accordingly, in exercise of its powers under section 35A of Banking Regulation Act, 1949 and all other powers enabling it in that behalf, the Reserve Bank of India, has today directed PPBL as below:
1. No further deposits or credit transactions or top ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime.
2. Withdrawal or utilisation of balances by its customers from their accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc. are to be permitted without any restrictions, upto their available balance.
3. No other banking services, other than those referred in (ii) above, like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc.), BBPOU and UPI facility should be provided by the bank after February 29, 2024.
4. The Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd. are to be terminated at the earliest, in any case not later than February 29, 2024.
5. Settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024 and no further transactions shall be permitted thereafter.
This is huge, in other words, all banking services available on Paytm, such as bill payment, UPI, wallet, etc., will not be available after February 29, 2024. If you have Paytm FASTag balance, wallet balance, fuel wallet balance or Paytm Payment Bank balance, you can transfer or use them even after February 29, 2024, but fresh credit or wallet/FASTag recharge will not be permitted.
Paytm is in real trouble now. Let's see how Paytm responds to this problem and how they overcome it.
Update (1st Feb, 2024):
Paytm, in its mandatory disclosure under Regulation 30 of SEBI on February 1, 2024, mentioned that One 97 Communications Limited (OCL), a payment company working with various banks, including Paytm Payments Bank Limited (“PPBL”), will now exclusively collaborate with other banks. In the next phase of OCL’s journey, it aims to expand its payments and financial services business through partnerships with different banks.
The Paytm Payment Gateway business for online merchants will continue providing payment solutions to existing merchants. OCL’s offline merchant payment network offerings, such as Paytm QR, Paytm Soundbox, and Paytm Card Machine, will also continue as usual, allowing onboarding of new offline merchants.
Regarding the termination of the nodal account of OCL and Paytm Payments Services Limited (PPSL) by February 29, 2024, both entities will transition the nodal account to other banks during this period. OCL plans to establish partnerships with various other banks to offer diverse payment products to its customers.
OCL’s additional financial services, including loan distribution, insurance distribution, and equity broking, are not directly associated with Paytm Payments Bank Limited and are expected to remain unaffected by this direction.
It appears that Paytm will continue to offer UPI and bill payment services through collaborations with other banks. They already started selling fastag from HDFC Bank. Further developments are anticipated, and we await more clarity on the situation in the coming days.
Official document link (attached): https://www.bseindia.com/xml-data/corpfiling/AttachLive/02a4a3a1-8cc0-4cde-a35f-d4f70ca98377.pdf
Update (2nd Feb, 2024):
According to some media reports, this could mark the end of the giant. In an exclusive interview with CNBC-TV18, former Executive Director of RBI, Deepali Pant Joshi, shared her perspective on the matter, referring to it as a "disaster that had been in the making since October 2023." Joshi highlighted Paytm's nonchalant attitude towards the reasons behind the ₹5.39 crore fine imposed in October 2023.
For the full interview, you can visit: CNBCTV18 Interview
It appears that Paytm was too casual about its KYC norms. On Twitter, particularly among some fintech founders, there is support for Paytm, with claims that RBI is anti-fintech and unjustly treating Paytm. But the real picture is bit different.
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