Paytm Payments Bank barred from adding new customers by the RBI.

Paytm Payments Bank has been directed by the Reserve Bank of India (RBI) to stop onboarding new customers due to “material supervisory concerns” identified in the bank. The RBI issued an official statement indicating that it had exercised its powers, including those under Section 35A of the Banking Regulation Act, 1949, and directed Paytm Payments Bank Ltd to stop onboarding new customers with immediate effect. Additionally, the bank has been asked to appoint an IT audit firm to conduct a comprehensive audit of its IT system.

The RBI further stated that the onboarding of new customers by Paytm Payments Bank Ltd would be subject to specific permission granted by the RBI after reviewing the report of the IT auditors. The bank began its operations in May 2017 after being incorporated in 2016, and Paytm founder Vijay Shekhar Sharma owns 51% of the bank.

The RBI’s action on Friday came two days after several reports suggested that Paytm Payments Bank may apply for a small finance bank license by June. In December 2021, the bank had received the RBI’s approval to function as a scheduled payments bank, which enabled it to expand its financial services operations.

In November 2021, Paytm’s initial public offering (IPO) failed to make an impact on its stock market debut, casting a shadow over the prospects of other technology firms in India that were preparing to go public.

Paytm Payments Bank has been a significant player in India’s digital payments industry, and the RBI’s action has caught many by surprise. However, the central bank’s decision to halt the onboarding of new customers is a significant blow to the bank’s growth prospects. This move may also impact Paytm’s plans to expand into the digital banking space.

Paytm Payments Bank has been at the forefront of the digital payments revolution in India, along with its parent company Paytm. The bank’s mobile app has become a popular platform for making online payments and money transfers, and its user base has been growing steadily over the years. However, the RBI’s recent action could impact the bank’s reputation and credibility.

Paytm Payments Bank has faced regulatory scrutiny in the past as well. In 2018, the RBI imposed a penalty of INR 5 million on the bank for violating Know Your Customer (KYC) norms. The bank was also accused of opening accounts of customers without their consent. The RBI had also asked the bank to stop onboarding new customers until it resolved the KYC violations.

The RBI’s decision to stop Paytm Payments Bank from onboarding new customers has come as a shock to many in the digital payments industry. The bank’s growth prospects could be impacted significantly, and it may find it challenging to expand its services without adding new customers. However, the RBI’s action is likely to be seen as a positive step towards ensuring the safety and security of customers’ financial data. The RBI’s regulatory oversight is critical in maintaining trust in India’s digital payments ecosystem and safeguarding the interests of consumers.