The Reserve Bank of India (RBI) asked Paytm’s digital banking unit, Paytm Payments Bank, to halt new user onboarding on its platform.
The RBI explained its decision, stating that it was prompted by “some serious supervisory concerns” in the bank. Furthermore, the bank has been ordered to hire an IT auditing firm to undertake a full system audit of its IT system.
“Action against Paytm Payments Bank Ltd under section 35 A of the Banking Regulation Act, 1949. The RBI 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,” a press release from RBI said.
“Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing the report of the IT auditors,” the release added.
Paytm apparently planned to apply for a small finance bank (SFB) licence from the Reserve Bank of India (RBI) by June this year, according to reports.
Small Finance Banks are a type of banking segment created by the Reserve Bank of India with the goal of promoting financial inclusion by providing basic banking services to underserved and unserved segments such as small businesses, small and marginal farmers, micro and small industries, and unorganised entities.
Vijay Shekhar Sharma’s Paytm Payments Bank had previously gained RBI approval to function as a “scheduled payments bank” in December 2021, allowing it to extend its financial services operations.
