RBI cancels Paytm Payments Bank licence citing regulatory violations, depositor concerns

In its order on Friday, the RBI said the bank's operations were found to be detrimental to the interests of depositors and the institution itself, and that the general character of its management was prejudicial to public interest.

The regulator also noted that the bank failed to comply with conditions stipulated in its payments bank licence.

RBI said, "The affairs of the bank were conducted in a manner detrimental to the interest of the bank and its depositors".

As a result, the licence issued under Section 22(4) of the Banking Regulation Act, 1949 has been withdrawn. As per RBI direction, Paytm Payments Bank Limited is now prohibited from undertaking any banking activities or any additional business with immediate effect.

The RBI said it will initiate the process for winding up the bank by filing an application before the High Court. It, however, clarified that the bank has sufficient liquidity to repay its entire deposit liabilities upon winding up.

RBI said "Paytm Payments Bank Limited has enough liquidity to repay its entire deposit liabilityupon winding up of the bank".

Detailing the reasons, the RBI stated that the bank was not in compliance with provisions as its affairs were conducted in a manner detrimental to the interests of the bank and its depositors.

Further, the regulator observed that allowing the bank to continue operations would not serve any useful purpose or public interest. It also flagged non-compliance with licence conditions.

The action follows earlier regulatory interventions. The bank had been directed to stop onboarding new customers from March 11, 2022. Later, in January and February 2024, additional restrictions were imposed, including a ban on accepting fresh deposits, credits, or top-ups in existing accounts, wallets, and prepaid instruments. (ANI)