RBI revokes Paytm Payments bank license; To approach the Supreme Court
MUMBAI: The RBI on Friday canceled the banking license of Paytm Payments Bank with immediate effect, barring it from doing any banking business and starting the liquidation process, even if the entity has already been converted into a recycling corporation after earlier restrictions.The Reserve Bank of India said it would file an application for liquidation of the bank in the Supreme Court. She added that the bank has sufficient liquidity to pay all deposit obligations upon liquidation. PPBL has been encouraging depositors to withdraw funds after restrictions on all activities two years ago rendered the bank a dead institution.While the liquidation itself has no material impact on One97 Communications, the company that owns the Paytm brand, the RBI has invoked various sections that enable it to shut down banks if it has an adverse view on a bank’s operations.
This may intensify regulatory scrutiny on the parent company and on any new or existing licenses held by the group entities, and may serve as a red flag for new RBI licences. Even more so given the statements issued by the Reserve Bank of India to justify the cancellation of the licence.“The affairs of the bank were being managed in a manner prejudicial to the interest of the bank and its depositors,” the Reserve Bank of India said, adding that “the general nature of the management of the bank is prejudicial to the interest of depositors as well as public interest.”
“No beneficial purpose or public interest will be served by allowing the bank to continue,” she said, adding that the bank had failed to adhere to the terms of the licence.
The Reserve Bank of India (RBI) had directed the bank to stop taking new customers from March 11, 2022. It later imposed restrictions on January 31, 2024 and February 16, 2024 which prevented further deposits, credits or top-ups in customer accounts, prepaid instruments and wallets.UPI’s services as a third-party provider are now being expanded with handles of banks like Axis Bank, Yes Bank and State Bank of India, allowing users to continue transactions through the app. Merchants continue to acquire, including QR-based payments, through partner banks, with settlement accounts migrated away from the bank. The wallet business, which was linked to the bank, has seen restrictions on new loadings following previous restrictions and will end.
It is expected that bank issued debit cards will become inactive over time.