Politics News

Paytm Payments Bank Can’t Onboard New Customers: Can you Use your Paytm App? Know Details

RBI bans Paytm from onboarding new customers: RBI announced that it has banned Paytm Payments Bank from onboarding new customers with immediate effect, citing ‘material supervisory concerns’ observed at the bank. It has also directed the payments bank arm to appoint an external firm to conduct a comprehensive IT audit. RBI indicated it will make a call on allowing the onboarding of customers by Paytm Payments Bank only after reviewing the IT audit report.

“Reserve Bank of India has today, in the 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,” the central bank said in a statement.

According to the RBI, the action followed material supervisory issues at the payments bank. Paytm is yet to comment on the development, but some reports suggest that several reasons including violation of norms related to Know Your Customer (KYC), data storage, data privacy, and outsourcing of data, could be behind the RBI move.

Impact on Paytm Customers

The latest bar on the Paytm Payments Bank will not have any impact on the existing Paytm users. They will be able to do their app-related transactions as usual.

However, the latest RBI action comes at a time when Paytm was eyeing to upgrade its payments bank to a small finance bank licence, after completing five years of operation in May this year. So, the latest RBI directive could be a cause of concern on that front.

Impact on Business

“We do not expect the impact on business for Paytm from this ban to be substantial, since Paytm has already onboarded a very large customer base onto the payments bank. However, we would expect a significant impact on Paytm’s brand and customer loyalty going forward,” the Macquarie report read.

Meanwhile, an industry source said that “This will have an impact on Paytm’s business operations. In addition, there might be reputational concerns as well, considering Paytm has been earlier prohibited by the RBI from onboarding new customers when the RBI had identified lapses in Paytm’s KYC processes.

According to Macquarie, the recent developments substantially reduce Paytm’s chances of upgrading to a small finance bank licence. The company is due to apply for the licence in May 2022, after the Payments Bank completes five years.

Paytm Payments Bank was incorporated in August 2016 and formally began its operations in May 2017 from a branch in Noida. As per the last disclosed numbers, PPBL had around 6.4 crore customers.

This is not the first time Paytm and Paytm Payments Banks led by Vijay Shekhar Sharma have run into troubles with RBI. The RBI had in June 2018 too prohibited PPBL from onboarding new customers on account of supervisory concerns. The restrictions were lifted on December 31, 2018.

The central bank had also issued a show-cause notice to the firm dated July 29, 2021, stating that Paytm Payments Bank had committed an offence under the Payment and Settlement Systems Act, 2007 by submitting false information to RBI confirming completion of the transfer of Bharat Bill Payment Operating Unit business by One97 Communications to PPBL.

Read all minute-by-minute news updates for Uttar Pradesh election results 2022, Punjab election results 2022, Uttarakhand election results 2022, Manipur election results 2022, and Goa election results 2022.

Click here for seat-wise LIVE result updates.

Leave a Reply

Your email address will not be published.