Reserve Bank of India (RBI) ordered Paytm Payments Bank to cease all deposits and credit transactions after February 29th, 2024. Due to persistent non-compliance and ongoing supervisory concerns within Paytm, RBI took this action.
RBI’s Restriction on Paytm
Paytm payment bank is not permitted to accept deposits, or top-ups in customer accounts, prepaid instruments, Fastags, National Common Mobility cards, or wallets. However, customers can withdraw funds from their accounts (from savings accounts, current accounts, Fashtags, prepaid instruments, etc), without any restrictions, up to the available balance. However, certain services such as fund transfers and UPI facilities, will not be allowed by the apex bank.
RBI stated, “No further deposits, credit transactions, top-ups shall be allowed in any customer accounts, wallets, prepaid instruments, Fastags, NCMC cards, etc. after February 29, other than any interest, cashback, or refunds which may be credited anytime.”
RBI ordered the termination of Nodal Accounts belonging to One 97 Communication Ltd and Paytm Payment Services Ltd. One 97 Communications has ownership of 49 percent of Paytm Payment Bank.
The bank allows holders to offer several banking services. Paytm might have to move many of its businesses to other banks, as Nodal accounts are terminated by the apex bank.
Furthermore, RBI added that the completion of transactions and settlements of nodal accounts should be completed by March 15th, 2024. No transaction will be permitted beyond this date.
Additionally, After Feb 29th, banking services like fund transfer, UPI facility, and BBPOU (Bharat Bill Payment Operating Unit) will not be permitted. Paytm also offers other services like movie booking, travel tickets, and others, will be allowed.
Not the First time for Patym
This is not the first time RBI has issued some restriction on Paytm payment bank. The first instruction was given in March 2022, and Paytm was ordered to halt onboarding customers immediately. After finding that Paytm’s headquarter in Noida had violated rules by allowing data to flow to servers outside of India and showed carelessness in customer verification. Now, the apex bank terminated Nodal accounts and instructed to settle all pipeline transactions by March 15th, 2024.
A senior industry executive said that this is huge and will have an impact in multiple places. As many small enterprises use Paytm for salary payments, will face issues. In December, Paytm Fastags reported 57 million transactions which was the highest in the industry. Thus, these restrictions will affect transactions.
RBI’s Restriction on Other Banks
HDFC (Housing Development Finance Corporation) bank was stopped from issuing credit cards for less than a year and launching new digital initiatives, by RBI. It has also stopped Mastercard and American Express from issuing new cards for violation of data localization.
