On Wednesday, the Reserve Bank of India (RBI) directed Paytm Payments Bank to cease taking new deposits into its wallets or accounts after February 29, 2024. The regulator informed Paytm Payments Bank, a subsidiary of one of the biggest payment companies in India, that it would not be permitted to accept new deposits, process credit transactions, or provide cash transfers, including the Unified Payments Interface (UPI) service, after February 29.
Yogesh Dayal, a chief general manager at the central bank, stated in a press release that “no further deposits or credit transactions or top-ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashback, or refunds which may be credited anytime.”
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The statement further stated that clients may withdraw or use balances from any of their accounts, including savings bank accounts, current accounts, prepaid cards, FASTags, National Common Mobility Cards, etc., without any limitations, up to the amount that is accessible to them.
Why Has the RBI Placed Restrictions On Paytm Payments?
The RBI requested that the Paytm Payments Bank cease accepting new clients in March 2022.
Without providing specifics, the RBI stated that more supervisory action was necessary due to repeated non-compliance and ongoing major supervisory issues in the bank, as uncovered by a Comprehensive System Audit report and the external auditors’ following compliance validation report.
The central bank also stated that the action against Paytm Payments Bank was conducted by Section 35A of the Banking Regulation Act, 1949.
What did the Paytm Payments Bank have to say about RBI limitations?
One 97 Communications Limited (OCL) affiliate, Paytm Payments Bank, declared that it follows the RBI’s instructions with “immediate steps”.
The fintech company stated on Thursday that OCL, as a payments company, collaborates with multiple banks (not just Paytm Payments Bank) on a range of payment products.” We will speed up the plans and switch entirely to other financial partners. OCL will not collaborate with Paytm Payments Bank Limited; instead, it will only deal with different banks. The statement stated that OCL’s next step will be to grow its financial services and payments business but only in collaboration with other banks.
Paytm Is Likely To Lose More Than ₹500 Crore
Paytm stated that the RBI’s rule prohibiting Paytm Payments Bank from taking new deposits will have a “worst-case impact” on its yearly earnings of between ₹ 300 crore and ₹ 500 crore. Nonetheless, the business plans to “continue on its trajectory” to increase profitability.
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