Paytm Bank barred from adding new customers

Mumbai: The Reserve Bank of India (RBI) on Friday asked Paytm Payments Bank Ltd to stop onboarding of new customers with immediate effect, citing certain “material supervisory concerns” observed in the bank.

The banking subsidiary of Paytm parent One97 Communications had received RBI's approval to operate as a scheduled payments bank in December last year. The bank has also been directed to appoint an IT audit firm to conduct a comprehensive system audit of its IT system. Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by the RBI after reviewing report of the IT auditors, the regulator said.

“The Reserve Bank of India has today, in exercise of its powers, inter alia, under section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank Ltd to stop, with immediate effect, onboarding of new customers,” said the RBI in a statement.

“Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing report of the IT auditors. This action is based on certain material supervisory concerns observed in the bank,” added the RBI.

The ban comes months after the central bank imposed a monetary penalty of Rs 1 crore on Paytm Payments Bank for deficiencies in regulatory compliance.

The Vijay Shekhar Sharma-led firm had reported a massive loss of Rs 780 crore in the third quarter, led by stock options cost of Rs 390 crore.

According to the data from National Payments Corporation of India (NPCI) for January 2022, Paytm Bank had recorded 95.7 crore UPI transactions emerging as the country's top UPI beneficiary bank. The bank also maintained its stronghold in the FASTag segment, with over 4.3 lakh issuances in January.

The Paytm closed flat at Rs 774.80 on the BSE.