No concessions to Paytm Payments Bank; Bank likely to become dormant if RBI doesn’t lift curbs on March 15

Reserve Bank of India

The Reserve Bank of India (RBI) on February 16 extended the deadline for Paytm Payments Bank Ltd (PPBL) to stop accepting fresh deposits and do credit transactions to March 15 from February 29, as announced earlier.

However, the regulator’s latest press release or the FAQ (frequently asked questions) do not give any significant concessions or relaxations to the embattled payments bank.

“No further deposits or credit transactions or top-ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards, etc. after March 15, 2024, extended from the earlier stipulated timeline of February 29, 2024, other than any interest, cashbacks, sweep in from partner banks or refunds which may be credited anytime,” the RBI said in a release.

It is important to note that the RBI has only extended the deadline on business restrictions by two weeks. If the regulator doesn’t lift the curbs on the payments bank by March 15, it will likely become dormant without permission to accept fresh deposits or do credit transactions.

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Also, the central bank has clarified that existing Paytm bank customers with available balances don’t need to worry. “However, for the purpose of services such as withdrawal or utilisation of available balance by customers or wallet holders, such fund transfers including AEPS, IMPS, and UPI may be allowed anytime,” the RBI said.

More importantly, the RBI emphasised that withdrawals up to the available balance should be facilitated by PPBL from all accounts and wallets, excluding the ones that are frozen or lien marked by Law Enforcement or judicial authorities.

The big regulatory clampdown

On February 16, the RBI issued an FAQ on action taken against Paytm Payments Bank Ltd (PPBL), outlining the different aspects of the directions and assuring that customers of the bank wouldn’t be impacted because of the central bank step.

In February monetary policy, RBI Governor Shaktikanta Das said that the central bank will issue an FAQ on the Paytm issue. “Over the last few days, we have received a lot of queries. We have noted them down. Based on that, we will be issuing an FAQ sometime next week,” Governor Shaktikanta Das said.

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.

On January 31, the RBI said it had imposed business restrictions on Paytm Payments Bank. 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.

On March 11, 2022, the RBI barred Paytm Payments Bank from taking on new customers for the second time, saying that it had violated know-your-customer or KYC norms. No further deposits or, credit transactions or top-ups are allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc., after February 29, other than any interest, cashbacks or refunds that may be credited anytime, the RBI said.