RBI Investigates Paytm Over 1,000 Accounts Linked to a Single PAN

Paytm Payments Bank, a prominent player in India’s digital finance landscape, has come under intense regulatory scrutiny as the Reserve Bank of India (RBI) takes decisive action to address significant lapses in compliance.

The Reserve Bank of India has implemented stringent measures against Paytm Payments Bank after discovering a multitude of accounts created without proper identification, a revelation made by insiders familiar with the matter. These accounts, lacking sufficient Know-Your-Customer (KYC) information, facilitated transactions amounting to crores of rupees, raising concerns about potential money laundering activities.

PAN Concerns: A major red flag emerged as over 1,000 users were found to have linked the same Permanent Account Number (PAN) to their accounts. The compliance details submitted by the bank were subsequently deemed incorrect during thorough verification processes conducted by both the RBI and external auditors.

Money Laundering Fears: Sources reveal that the RBI is particularly concerned about the possibility of some accounts being exploited for money laundering purposes. In response to these concerns, the RBI has not only informed the Enforcement Directorate but has also shared its findings with the Ministry of Home Affairs and the Prime Minister’s Office.

Enforcement Directorate’s Role: Revenue Secretary Sanjay Malhotra stated that the Enforcement Directorate will initiate a probe into Paytm Payments Bank if any evidence of illegal activities is uncovered.

Non-disclosure and Governance Issues: Further complicating matters are reports of non-disclosure of significant transactions within the group and associated parties. The central bank’s scrutiny has also exposed governance standards loopholes, specifically in the linkage between Paytm Payments Bank and its parent company, One97 Communications Ltd.

Data Privacy Concerns: Transactions routed through the parent app of Paytm have raised data privacy concerns, prompting the RBI to halt transactions through Paytm Payments Bank. While user deposits in various accounts remain unaffected, the company is compelled to rely on third-party banks for its operations until February 29.

Market Impact: In the wake of the RBI’s regulatory actions, Paytm’s stock witnessed a sharp decline, plummeting by 36% over two days and wiping $2 billion off its market value. Paytm founder Vijay Shekhar Sharma, however, dismissed the regulatory actions as a “speed bump” during a conference call with analysts, seeking to reassure stakeholders amidst the ongoing turbulence.

Conclusion: As Paytm Payments Bank grapples with the fallout of regulatory interventions, the episode underscores the increasing importance of robust compliance measures in the rapidly evolving landscape of digital finance in India. The industry and investors will closely watch how Paytm addresses and rectifies these issues to regain regulatory trust and rebuild its market standing.