RBI orders shutdown of Paytm payments bank over compliance concerns
In a significant regulatory move, the Reserve Bank of India (RBI) has mandated the shutdown of Paytm Payments Bank, effective after March 15, citing “non-compliance issues and concerns” within the institution.
The directive from the RBI comes after the bank faced restrictions imposed on January 31 due to serious rule violations. As a result, Paytm Payments Bank will cease to offer services such as accepting deposits and processing credit transactions starting from March 15. This development has also prompted guidelines from the Bombay Stock Exchange (BSE) for investors who exclusively use the bank for stock trading purposes.
The decision to shut down the bank stems from reports revealing widespread non-compliance issues, including the opening of thousands of accounts without proper identification procedures. Such lapses have raised concerns over potential involvement in illegal activities like money laundering. Sources suggest that this information has been shared with authorities including the Enforcement Directorate (ED) and the Prime Minister’s Office.
In response to these developments, Revenue Secretary Sanjay Malhotra has indicated that the ED will launch an investigation into Paytm Payments Bank, which is slated to temporarily close its operations by March 15. Reports further highlight instances of multiple accounts being linked to the same identification proof, with transactions involving substantial sums, alongside an unusually high number of dormant accounts.
Following the closure of Paytm Payments Bank, customers will face several changes in their banking services:
- Deposits into Paytm Payments Bank accounts will be discontinued, although customers will retain the ability to withdraw or transfer funds after March 15.
- Services such as Salary Credit, Direct Benefit Transfers, or Subsidies will no longer be available in Paytm Payments Bank accounts, although refunds, cashbacks, and sweep-ins from partner banks will still be permitted.
- Facilities like top-up or money transfer within wallets will be inaccessible after March 15. However, customers can still make payments if there are available balances in their accounts.
The impending closure of Paytm Payments Bank underscores the gravity of regulatory concerns regarding compliance within the banking sector, necessitating stringent action to address lapses and ensure the integrity of financial systems.
