Compliance concerns prompt RBI action on Paytm Payments Bank
Shaktikanta Das emphasized that the issue pertained to a specific institution and did not pose concerns for the entire banking system
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Hyderabad: In a press conference held on Thursday, senior officials from the Reserve Bank of India (RBI) addressed the recent directives issued to Paytm Payments Bank Ltd (PPBL), stating that the decision to bar the bank from accepting deposits was part of a supervisory action proportional to the severity of the situation.
RBI Deputy Governor Swaminathan J clarified that such actions follow extensive engagement over several months, providing regulated entities with sufficient time to rectify issues, thereby safeguarding consumers and ensuring the stability of the financial system.
Governor Shaktikanta Das emphasized that the issue pertained to a specific institution and did not pose concerns for the entire banking system.
The RBI's directives came in response to compliance issues and supervisory concerns revealed in a Comprehensive System Audit report and subsequent validation by external auditors. This prompted the RBI to take further action under section 35A of the Banking Regulation Act, 1949.
Effective immediately, PPBL is prohibited from onboarding new customers. Additionally, several restrictions have been imposed on the bank's operations:
1. Transaction Freeze: PPBL cannot accept new deposits, credit transactions, or top-ups in customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc., after February 29, 2024, except for interest, cashbacks, or refunds.
2. Customer Withdrawals: Customers can withdraw or use balances without restrictions, up to their available balance.
3. Limited Banking Services: PPBL cannot provide banking services beyond customer withdrawals, effective February 29, 2024.
4. Nodal Accounts Termination: Nodal accounts of One97 Communications Ltd and Paytm Payments Services Ltd. must be terminated by February 29, 2024.
5. Transaction Settlement Deadline: All pipeline transactions and nodal accounts must be settled by March 15, 2024.
These measures highlight the seriousness of compliance issues within PPBL and the RBI's commitment to the stability and integrity of India's banking sector. The directives will impact PPBL's operations and competitive position in the digital banking landscape.
PPBL and its parent company Paytm must swiftly address compliance issues to regain regulatory trust and resume normal operations. Existing customers may experience disruptions as PPBL addresses these challenges.
Market analysts anticipate increased scrutiny of fintech companies operating within India's regulatory framework. Investors and stakeholders will closely monitor PPBL's response to the directives and its efforts to address compliance concerns in the coming weeks.
