Post RBI action, what happens to your money in Paytm Wallet or Paytm Bank?

Merchants using Paytm Bank may be impacted and fastag GMV will be majorly affected. This can be a key risk to earnings valuations

The Reserve Bank of India (RBI) on January 31 imposed major business restrictions on Paytm Payments Bank, including accepting fresh deposits and doing credit transactions after February 29. The decision comes after the central bank in March 2022 barred Paytm Payments Bank from onboarding new customers.

But, what impact will this have on those who have their money in Paytm Wallet or Paytm Bank? Here’s an explainer.

Firstly, what is the action?

RBI informed the lender to stop onboarding new customers with immediate effect. In a press release, RBI said that the nodal accounts of One97 Communications and Paytm Payments Services are to be terminated at the earliest, in any case not later than February 29, 2024.

One97 Communications owns a 49 percent stake in Paytm Payments Bank.

When does the RBI rule apply to the bank?

RBI’s action of prohibiting any further credits or top-ups into Paytm Payments Bank account or wallet will take effect after February 29, 2024 (i.e. from March 1, 2024, onwards).

But what is the impact on customers?

For customers, services will be usual till February 29 and after that, they will not be able to make deposits or credit transactions or top-ups on their accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc.

Other things like interest, cashbacks, or refunds will be allowed after February 29.

What will be the impact on customers after February 29?

Existing customers will be able to withdraw and use their money in their accounts, FASTag service, etc. up to the balance available in their bank accounts.

“Withdrawal or utilisation of balances 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.

Will there be any impact on the digital services of Paytm?

No, customers can use the services as long as their account remains connected to an external bank.

Gaurav Goel, Founder - Director, Fynocrat Technologies said: “The RBI's move primarily targets Paytm's banking operations, allowing customers to still utilize Paytm for digital payments as long as their account remains connected to an external bank.”

Will the action impact usage of Paytm app or UPI through Paytm app?

No. Users can continue to use Paytm and UPI through Paytm without any restriction as the app is owned by the parent company and not by Paytm Payments Bank

But what happens if the Paytm app or the wallet of the user is linked to an account maintained with the bank?

The customers can continue to use the app for usage of funds without any restriction. Additionally, they can continue to receive the credits up to February 29, 2024. No credits will be allowed into the bank account or wallet from March 1, 2024.

What happens to prepaid instruments, FASTag, NCMC transit cards, etc. services?

The balance available in these instruments can be used, withdrawn or transferred, as the case may be, without any restrictions. However, any top-up or further credits into these accounts are allowed only up to February 29, 2024

What is the status of the RBI’s action announced on March 11, 2022?

The business restriction imposed on March 11, 2022, continues to be in force and the action announced on January 31, 2024, is over and above this.