The Reserve Bank of India has strictly asked Paytm Payments Bank to appoint the IT auditor only after consulting RBI and has informed that the terms of reference of this appointment will be decided by the central bank, according to a person familiar with the development.
"The IT auditor will be appointed in consultation with RBI and the terms of reference will be decided by the central bank," the person said requesting anonymity.
On March 11, the RBI said it had asked the payments bank to stop onboarding new customers. Besides, the regulator ordered a comprehensive IT system audit.
"Onboarding of new customers by Paytm Payments Bank will be subject to specific permission to be granted by RBI after reviewing report of the IT auditors. This action is based on certain material supervisory concerns observed in the bank," the RBI said.
This is the second such ban on a prominent banking institution in the last two years.
Paytm Payments Bank commenced its operations on May 23, 2017. On March 9, Moneycontrol reported that the Vijay Shekhar Sharma-promoted entity is likely to apply to the RBI for a small finance bank (SFB) licence by June.
Paytm Payments Bank chairman Sharma holds 51 percent stake in the company.
According to the the firm's website, the company has 100 million KYC customers and is adding 0.4 million users every passing month. "We are also the largest issuer of FASTag with over 8 million FASTag units issued," the website says.
On December 9, Paytm Payments Bank said it had been included in the Second Schedule to the Reserve Bank of India Act, 1934. This enabled it to explore new business opportunities, the company said in a press release.
Paytm Payments Bank on March 12 said it was taking immediate steps to comply with RBI directions after the regulator barred the company from onboarding new customers.
“Paytm Payments Bank remains committed to working with the regulator to address their concerns as quickly as possible. We shall notify when we recommence the opening of new accounts after obtaining RBI approval,” the lender said in a statement late Saturday.
New customers, however, will not be able to open current or savings accounts with the lender. They will also not be able to open the Paytm Payments Bank wallet, the lender said.
Further, new users operating the Paytm app can create Paytm UPI handles and link them to their existing payments bank account or to other bank accounts.
For existing customers, fixed deposits with the lender and other partnered banks, the balance maintained in their Paytm Wallet, FASTag, or Wallet Card and UPI services are completely safe and functional, the lender said.
Payments banks have an upper limit of Rs 2 lakh per deposit account and cannot lend. Paytm Payments Bank partners with lenders to extend loans and gather deposits of over Rs 2 lakh.
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