The Reserve Bank of India (RBI) announced Friday (April 24) that it was canceling the license issued to the bank, an off-shoot of Indian FinTech Paytm.
“Consequently, Paytm Payments Bank Limited is prohibited from conducting the business of ‘banking’… with immediate effect,” the regulator said in a news release. “RBI will make an application for winding up of the bank before the High Court.”
The RBI, which is also India’s central bank, said it canceled the license after finding that the “affairs of the bank were conducted in a manner detrimental to the interest of the bank and its depositors,” and that the “general character of the management of the bank is prejudicial to the interest of depositors as also the public interest.”
Paytm Payments Bank had been ordered to stop onboarding of new clients in March of 2022 and was fined by the RBI in October 2023 for noncompliance, including violations of know your customer regulations.
In January 2024, RBI essentially shuttered the business after an audit uncovered “persistent noncompliances” and “supervisory concerns.” This meant the bank was forbidden from taking deposits, permitting credit transactions, or allowing top-ups on customer accounts, wallets, cards or prepaid instruments.
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The regulator added Friday that Paytm Payments Bank has enough liquidity to repay its entire deposit liability following the winding up.
In response to the RBI’s order, Paytm said that its board and shareholders had approved resolutions to allow for the winding up of the bank. Paytm added that it has no exposure to or material business with the bank.
“The company wishes to assure its shareholders and investors that the winding-up of PPBL and the consequential cessation of the associate relationship are not expected to have any material impact on the business, operations, or financial condition of the company,” Paytm said in a disclosure document posted to its website.
“The company continues to operate its businesses independently and in accordance with applicable laws and regulations.”
Paytm had said earlier this year that it had enjoyed a string of profitable quarters, and had begun enlisting online merchants following RBI approval to become an aggregator. As covered here, this allows Paytm to collect and settle payments for businesses using its network, providing security and ease in accepting digital transactions.
