𝗧𝗵𝗲 𝗥𝗲𝘀𝗲𝗿𝘃𝗲 𝗕𝗮𝗻𝗸 𝗼𝗳 𝗜𝗻𝗱𝗶𝗮 has acted upon one of India’s prominent payment apps, prohibiting the entity from providing additional banking services starting March 2024. This action responds to concerns about breaches and non-compliance with regulatory norms. According to the RBI, a Comprehensive System Audit report and subsequent compliance validation report by external auditors revealed persistent non-compliance and ongoing material supervisory concerns, prompting further supervisory action. The regulator had earlier directed the entity, in March 2022, to cease onboarding new customers and engage an IT audit firm for a thorough System Audit.
𝗘𝗳𝗳𝗲𝗰𝘁𝗶𝘃𝗲 𝗙𝗲𝗯𝗿𝘂𝗮𝗿𝘆 𝟮𝟵, 𝟮𝟬𝟮𝟰, the entity will no longer be permitted to accept deposits, engage in credit transactions, or conduct top-ups in customer accounts, prepaid instruments, wallets, FASTags, NCMC (National Common Mobility Cards), and similar services. However, interest, cashback, or refunds may still be credited at any time.
Additionally, the entity must allow customers to withdraw or utilize balances without restrictions, including from their savings and current bank accounts, prepaid instruments, FASTags, and NCMC, up to the available balance.
The newly imposed restrictions amount to the cessation of banking operations unless the entity opts to transfer or route its payment services through another bank. Industry experts suggest that until such a transition occurs, Paytm may encounter challenges in conducting various payment-related transactions, extending beyond the scope of the payments bank.