Paytm Payments Bank: RBI action came after persistent non-compliance, says DG Swaminathan

During its probe, the RBI found that in thousands of cases, the same PAN was linked to more than 100 customers and in some cases to more than 1,000 customers

The Reserve Bank of India's action against Paytm Payments Bank, the banking entity of Paytm, followed persistent non-compliance, deputy governor Swaminathan J has said.

“This is supervisory action for persistence non-compliance. Such action is invariably preceded by months and sometimes years of bilateral engagement where we point out the deficiencies but also give time to take corrective action. As a regulator, it is incumbent upon us to protect the consumer,” Swaminathan said.

The deputy governor was responding to a query on the central bank's curbs on Paytm Payments Bank at the post-MPC press conference.

On January 31, the RBI imposed major business restrictions on Paytm Payments Bank, including a bar on accepting fresh deposits and doing credit transactions after February 29.

The regulator found major irregularities in KYC, which exposed the customers, depositors and wallet holders to serious risks.

In its probe, the RBI found that in thousands of cases, the same PAN was linked to more than 100 customers and in some cases to more than 1,000 customers. The total value of transactions, running into crores of rupees, much beyond regulatory limits in minimum KYC pre-paid instruments, raising money-laundering concerns.

The regulator also found an unusually high number of dormant accounts, which could have been used as mule accounts. There are also concerns relating to money-laundering arising from deficiencies in the KYC processes and lack of transaction monitoring system of the bank.

The RBI mandated certain categories of lenders to provide borrowers with key fact statements which provide details of all transactions fees, interest, etc.

The RBI retained the key interest rate repo at 6.5 percent, signalling that the central bank's long battle against high inflation is not over. It retained the monetary policy stance unchanged at withdrawal of accommodation.

At 12.37 pm, Paytm was trading at Rs 457.15 on the National Stock Exchange, down 7.88 percent down from the previous close.