The Reserve Bank of India has canceled the banking license of Paytm Payments Bank. The cancellation is effective from April 24. Consequently, Paytm Payments Bank has been prohibited by the central bank from conducting the business of ‘banking’.
The central bank said that Paytm Payments Bank has enough liquidity to repay its entire deposit liability upon winding up of the bank.
It is important to note that the Reserve Bank has canceled only the banking license of Paytm Payments Bank; Paytm, as the UPI App, continues to function normally.
Why was Paytm Payments Bank’s license canceled?
The Reserve Bank said it canceled Paytm Payment Bank’s license because the bank’s affairs were conducted in a manner detrimental to its interests and those of its depositors. RBI observed that the general character of the bank’s management is prejudicial to the interests of depositors, as well as to the public interest.
“No useful purpose or public interest would be served by allowing the bank to continue as envisaged in Section 22 (3) (e) of the BR Act.” RBI said in a press note. It noted that Paytm Payments Bank failed to comply with the conditions stipulated in the Payments Bank license issued to it
Earlier orders by RBI on Paytm Payments Bank
Earlier, the central bank had prohibited Paytm Payments Bank from onboarding new customers in March 2022. Later, the RBI prohibited Paytm Payments Bank from deposits or credit transactions or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards etc.