Not exploring legal options, says Paytm Payments Bank

Paytm Payments Bank has come under regulatory scanner because of non-compliance to KYC norms

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26 Aug, 2025 12:21

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Paytm Payments Bank has no intention of challenging the Reserve Bank of India (RBI) in court and is instead working with the banking regulator to ensure compliance and address concerns flagged by it, the company told Moneycontrol.

On January 31, the RBI directed Paytm Payments Bank to stop onboarding new customers due to “persistent non-compliance and continued material supervisory concerns in the bank”.

Paytm Payments Bank has been asked to stop accepting deposits, transactions, top-ups in customer accounts, wallets, FASTags, prepaid instruments, NCMC cards and related services.

Legal remedy

While legal experts said that Paytm has the option of approaching a high court through a writ petition, and there are precedents in this regard, the company ruled out the possibility of challenging the possibility of challenging the RBI order in a court.

“We are not exploring legal options or considering the filing of a writ petition in the high court to challenge the Central Bank’s directives on our associate Paytm Payments Bank. Our focus remains on compliance as we continue to provide seamless services to our customers,” said Paytm in response to a Moneycontrol query.

In the past, there have been instances where the central bank’s orders have been challenged. In 2018, Kotak Mahindra Bank promoter Uday Kotak approached the Bombay High Court on an issue pertaining to promoter shareholding but the legal route is often arduous, experts said.

Also read: Paytm’s best option would be a representation to RBI, say legal experts

An arduous route

“The challenge is, unlike other regulators, RBI does not have an appellate body to directly challenge its order. Hence, aggrieved parties have to resort to constitutional remedies like approaching the high court or Supreme Court, to challenge the directions,” said Vinod PV, Senior Partner, IndiaLaw LLP.

“Section 35A allows RBI to modify or cancel its direction suo moto or on representation made by the party. Hence, the best option for Paytm is to make necessary corrective measures and approach RBI to modify the direction.”

Also read: VSS, senior Paytm officials meet RBI, regulators not keen on saving wallets business

Some RBI orders have been struck down by the courts. One prominent example is an RBI circular pertaining to stressed asset resolution, which was set aside by the Supreme Court in April 2019. The apex court also struck down an RBI circular on crypto assets in March 2020.

However, both cases were industry-level directions and not specific directions to a company. Legal experts said that there is also personal liability on the directors and other senior employees of the company.

To be sure, RBI can impose only civil penalties on the participants violating rules. However, based on the RBI findings, if any other regulator initiates proceedings, there could be criminal consequences as well, the legal experts said.

“Given the possible legal consequences, including imprisonment and fines under the applicable laws, directors of the Payments Bank may opt to seek anticipatory bail from the courts,” said Jidesh Kumar, managing partner, King Stubb & Kasiva, Advocates and Attorneys.

“The Payments Bank should safeguard all physical, electronic, and digital documentary evidence in a tamper-proof secure environment to substantiate their case and demonstrate their bona fide actions,” Kumar added.