“Reserve Bank of India likely to End Operations of Paytm Payments Banks”

The Reserve Bank of India (RBI) is reportedly considering the cancellation of Paytm Payments Bank’s operating license as early as next month, pending the safeguarding of depositors, according to sources familiar with the matter. The central bank is expected to take action after a self-imposed February 29 deadline, which, if crossed, would prohibit Paytm Payments Bank customers from replenishing their savings accounts or using the digital payment wallet.

The potential move comes in response to various violations, including the misuse of customer documentation rules and the non-disclosure of material transactions, insiders said. These sources, who requested anonymity due to the private nature of the information, highlighted concerns over Paytm’s compliance, emphasizing that no final decision has been reached, and the RBI’s stance may evolve based on representations from Paytm.

The RBI has not yet responded to requests for comment.

A spokesperson for Paytm Bank acknowledged the recent directive from the central bank, characterizing it as part of the ongoing supervisory engagement and compliance process. The spokesperson highlighted the bank’s commitment to adhering to compliance and supervisory instructions from the regulator.

Sources revealed that hundreds of thousands of Paytm Payments Bank customers had not submitted know-your-customer documentation, and in some cases, a single identity document was used to register thousands of customers. Additionally, transactions well beyond regulatory limits were allegedly conducted in minimum-KYC accounts, raising concerns about potential money laundering.

The sudden suspension of much of Paytm’s business by India’s banking regulator has shocked the finance and tech industries. The move follows multiple warnings over the past two years regarding questionable dealings between Paytm’s popular payments app and its lesser-known banking arm.

If the RBI decides to cancel Paytm Payments Bank’s operating permit, it would be perceived as a more severe action compared to the regulatory steps taken earlier in the week. Paytm Payments Bank Ltd. operates as a restricted bank, accepting deposits without the ability to lend. Billionaire Vijay Shekhar Sharma holds a 51% stake in the bank, with Paytm parent company One 97 Communications Ltd. owning the remaining shares.