The Reserve Bank of India on Friday, March 11, directed the Paytm Payments Bank Limited (PBBL) to stop onboarding any new customers. The central bank has also ordered an Income Tax (I-T) audit on the associate entity of Paytm. The RBI said that the directive was given based on “certain material supervisory concerns observed in the bank.”
“Reserve Bank of India has today, in exercise of its powers, inter alia, under section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank Ltd to stop, with immediate effect, onboarding of new customers," the RBI circular said.
"The bank has also been directed to appoint an I-T audit firm to conduct a comprehensive System Audit of its I-T system. Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing reports of the I-T auditors," the circular added.
Two days ago, MoneyControl reported that the Paytm Payments Bank was likely to apply for a small finance bank (SFB) licence with the RBI in June. The report also states that, if approved, the approval of the licence would coincide with the bank completing five years of existence. In December 2021, the company was approved to operate as a scheduled bank by the RBI. It was included in the second schedule to the RBI Act of 1934. The approval allowed Paytm Payment Bank to participate in requests for proposals issued by the government as well as big corporates, and fixed and variable rate repos, among other things. With this, the bank also became eligible to become a partner in the government’s financial inclusion scheme.
Paytm Payments Bank was incorporated in August 2016 and formally began its operations in May 2017 from a branch in Noida. Paytm, which started off as a mobile wallet in 2009, has gone on to add many more businesses — Paytm Payments Bank, Paytm Payments Gateway, Paytm Payout, Paytm Money, Paytm Insider, Paytm Insurance, and others. Earlier this month, the bank announced that it has issued seven million Visa debit cards through its platform in FY'21.
In December 2020, the RBI had barred HDFC Bank from launching any new digital products or services and issuing new credit cards till the lender resolved recurring tech issues.