In a move that is being seen as a shutdown of Paytm Payments Bank’s (PPBL) operations for all practical purposes, the Reserve Bank of India (RBI) on Wednesday disallowed it from receiving any deposit or do credit transactions after February 29.
“No further deposits or credit transactions or top ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime,” said the RBI notification.
On March 11, it had directed PPBL to stop onboarding of new customers with immediate effect. Explaining its rationale the latest move, RBI’s notification said that the Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action.
The notification, under Section 35A of the Banking Regulation Act, 1949, added that customers of the payments bank can withdraw or utilise balances from their accounts like savings accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards up to their available balance, without any restrictions.
Every other banking services including, unified payments interface or Bharat Bill Payment Operating Unit should be provided by Payment Payments Bank after February 29.
In addition, it also directed that the nodal accounts of One97 Communications and Paytm Payments Services must be terminated at the earliest. One97 Communications owns the Paytm brand.
Also, all the settlement of all pipeline transactions and nodal accounts with regard to transactions initiated on or before February 29 shall be completed by March 15, 2024, and no further transactions shall be permitted thereafter.
In a post earnings conference call with analysts in May 2022, Paytm President and Chief Operating Officer Bhavesh Gupta had said that bank is working to put all RBI-mandated processes in place in a time-bound manner. But since then, Paytm has not disclosed any timeline on when the Payments Bank will resume operations.
With the latest RBI directive, analysts feel that the Payments Bank’s future is under question. “For all practical purposes, the above notifications end operations of Paytm Payments Bank. This is a definite negative development and adds to the already heavy regulatory overhang on the business,” brokerage firm Bernstein Research said in a report on Wednesday.
But, the brokerage does not see any significant impact on Paytm’s UPI payments business or loan distribution business. But, there might be a slight impact on payments processing margin as some of the higher margin products like wallets, and FASTag are dependent on the payments bank.
Despite the curbs on the payments bank, shares of One97 Communications has risen 44% since March 2022. It closed marginally down by 0.013% on Wednesday.