Are you a Paytm Payments Bank account holder? Here’s what you can do

Paytm Payments Bank

Following the regulatory action on Paytm Payments Bank, depositors or account holders of the bank have raised concerns on what will happen to their money parked in Paytm Payments Bank Ltd (PPBL).

On January 31, the RBI imposed business restrictions on Paytm Bank citing repeated violations of prudential norms and non-compliance with multiple rules. The RBI barred PPBL from accepting fresh deposits and doing credit transactions after February 29.

The central bank said a Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliance and continued material supervisory concerns in the bank, warranting further supervisory action.

But what will happen to account holders of the bank? Will they face a situation similar to Punjab and Maharashtra Cooperative (PMC) Bank in 2019 or Yes Bank in 2020? Here’s an explainer.

Also read: Paytm Payments Bank says withdrawals smooth, meeting all regulatory requirements

What should I do now if I have money in Paytm Payments Bank?

It is up to the individual customers. Depositors can either keep their money with the bank till it is used or withdraw and deposit in another bank account or keep it as cash. The RBI has said that existing customers of the bank will be able to withdraw and use their money in their accounts, FASTag service, and so on, until the balance available in their bank accounts is exhausted. “Withdrawal or utilisation of balance 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, up to their available balance,” the central bank said. Additionally, RBI said that the settlement of all pipeline transactions and nodal accounts which are initiated on or before February 29, 2024, shall be completed by March 15, 2024. Post March 14, no such transactions shall be permitted.

Is my money in PPBL safe in the bank account?

Yes. Your money is absolutely safe in the Paytm Payments Bank account.  There are two key reasons for this. One, a depositor's money is safe and insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC). DICGC functions under RBI and provides deposit insurance which works as protection cover for deposit holders when their bank fails to pay its depositors.

Also Read: ED likely to initiate preliminary probe against Paytm Payments Bank

Secondly, as per rules, payments banks need to fully invest the daily deposit balances in government securities and commercial bank balances.

"We are mandated by RBI regulations to fully invest the daily deposit balances into G-Secs (75 percent) and commercial bank balances (25 percent). So, withdrawal/utilisation of customer balances as per RBI direction is handled smoothly as per requirement," a Paytm Bank spokesperson told Moneycontrol on February 15.

Is my money in PPBL insured under the DICGC?

Yes, as mentioned above, as per rules, individual deposits up to an amount of Rs 5 lakh are safe in all regulated banks under the RBI in the event of the lender turning insolvent. Under DICGC, all commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured.

According to information available on the DICGC website, the insurance by DICGC is applicable to accounts which are active with the bank till or on the date of liquidation or cancellation of the bank's licence or till the date when the bank has announced any merger or reconstruction measures.

Will Paytm Payments Bank depositors encounter a Yes Bank or PMC Bank like situation?

Industry experts are of the opinion that the situation with the depositors of Paytm Payments Bank is not comparable with that of Yes Bank or PMC Bank.

Also read: Banks would need to spend Rs 60-66 cr for re-KYC of Paytm Payments Bank merchant customers

What happened in the case of Yes Bank?

Following the near failure of Yes Bank, there were concerns among the depositors about the fate of their money, especially after the RBI imposed a moratorium on the bank. However, the RBI and the Government stepped in quickly and arranged a bailout of the bank with the help of leading banks in the country, led by the country’s largest lender, the State Bank of India. Not a single depositor lost money in the Yes Bank case.

In Yes Bank's case, the RBI stepped in quickly and orchestrated a reconstruction scheme.  Finance Minister Nirmala Sitharaman had assured depositors that their money with YES Bank was safe. She also confirmed State Bank of India's (SBI) interest in buying a stake in the beleaguered YES Bank. And eventually, SBI took a stake in the bank.

What happened in the PMC Bank case?

The situation was a lot more serious in the case of PMC Bank, one of the largest cooperative banks in the country which collapsed following a multi-year scam by the management. The uncertainty on the fate of the bank remained for about two years till the RBI permitted Unity Small Finance Bank to take over PMC Bank. As per the terms of the merger and the draft scheme for amalgamation the combined entity will return the depositors’ money piecemeal over an extended period of 10 years.

What do experts say?

N S Vishwanathan, former Deputy Governor (DG) of RBI said, "Depositors with Paytm Payments Bank need not have to worry because payments banks have a limit of taking deposits up to Rs 2 lakh. This amount is under the DICGC insurance".