RBI bars Paytm from offering banking services after February 

The Reserve Bank of India (RBI) has directed Paytm Payments Bank to stop its banking operations by the end of the month.

No further deposits, credit transactions, or top-ups will be allowed after 29 February, the central bank said. Customers, however, are allowed to withdraw or utilize balance in their savings bank accounts, current accounts, prepaid instruments, FASTags, and national common mobility cards without any restrictions, up to their available balance.

Paytm did not immediately respond to an email requesting comment. It has, however, scheduled a conference call with reporters to discuss the issue later Thursday. 

Earlier in March 2022, the RBI had directed Paytm to stop the onboarding of new customers until a comprehensive audit of its IT system was concluded. It had asked the bank to appoint an IT audit firm to conduct a comprehensive system audit of its IT system after certain material supervisory concerns were observed.

The latest action was taken after the 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,” the RBI said. 

The RBI told Paytm that no further deposits, credit transactions, or top-ups will be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after 29 February. However, interests, cashbacks, or refunds may be credited anytime.

Withdrawal or utilization of balances by its customers from their accounts are allowed without any restrictions, up to their available balance.

No other banking services like fund transfers, Bharat Bill Payment System (BBPS) transactions, and UPI facility will be provided by the bank after 29 February. 

The RBI said that the nodal accounts of One97 Communications Ltd, which owns Paytm, and Paytm Payments Services Ltd. are to be terminated before 29 February.

Settlement of all pipeline transactions and nodal accounts will be completed by 15 March and no further transactions will be permitted after that, the RBI said in its direction to Paytm Payments Bank, issued under Section 35A of the Banking Regulation Act, 1949. 

Paytm stocks tumbled in early trade on Thursday, falling by 20% and hitting the lower circuit.