The Reserve Bank of India (RBI) on Friday extended the deadline for Paytm Payments Bank services to March 15, from February 29. It stated that users can make deposits, credit transactions, prepaid services, wallets, FASTags, and National Common Mobility Cards until March 15, 2024.
Previously, the RBI prohibited the Paytm subsidiary from receiving any deposits, top-ups, or credit transactions into its controlled wallets or accounts beginning February 29.
The central bank also stated that it had imposed certain business restrictions on Paytm Payments Bank Ltd, which is operated by One97 Communications, in accordance with Section 35A of the Banking Regulation Act of 1949, in Press Releases dated March 11, 2022 and January 31, 2024.
Keeping in mind the interest of customers (including merchants) of PPBL who may require a little more time to make alternative arrangements and the larger public interest, the RBI said: "No further deposits or credit transactions or top-ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards, etc. after March 15, 2024 (extended from the earlier stipulated timeline of February 29, 2024), other than any interest.
"No banking services, other than those referred to in (ii) above, such as fund transfers (irrespective of the name and nature of services like AEPS, IMPS, etc.), BBPOU, and UPI facility, should be provided by the bank after March 15, 2024." However, for the purposes of (ii) above (i.e., withdrawal or use of available balance by customers or wallet holders), fund transfers such as AEPS, IMPS, and UPI may be allowed at any time."
The Reserve Bank of India (RBI) stated: "Settlement of all pipeline transactions in nodal accounts referred to in item (iv) above (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024, and no further transactions shall be permitted thereafter."
It is also directed that the bank facilitate withdrawals up to their available balance from all accounts and wallets, with the exception of those that have been frozen or lien flagged by law enforcement or judicial authorities.
The central bank also urged Paytm Payments Bank to assist the seamless withdrawal of customer deposits parked with partner banks under the automatic'sweep-in sweep-out' feature, without creating any trouble to such customers.
The RBI stated that clients will be allowed to withdraw or use balances from their accounts, which include savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, and so on, up to their available balance, without restriction.
Paytm Payments Bank Limited will terminate One97 Communications Ltd and Paytm Payments Services Ltd's Nodal Accounts as soon as possible, but no later than February 29, 2024.
The RBI has produced a series of frequently asked questions about Paytm Payments Bank. Following the MPC meeting earlier this month, RBI Governor Shaktikanta Das stated that the central bank would distribute FAQs to all stakeholders. "We have received a large number of inquiries during the last few days. We've noted them down. Based on that, we will release a FAQ probably next week," Governor Das stated.
The FAQs addressed many parts of the guidelines and ensured that the bank's customers would not be impacted by the central bank curbs. Earlier, after the MPC meeting, the RBI defended its decision, stating that it was taken against the fintech company due to chronic noncompliance.
"We do not wish to get into detail about the action against Paytm Payments Bank. This is a supervisory action for persistent noncompliance. Such action is almost often preceded by months, if not years, of bilateral interaction in which we highlight flaws while also giving time for corrective action. As regulators, it is our responsibility to protect the customer," RBI Deputy Governor Swaminathan J said.
The RBI stated that a Comprehensive System Audit report and a subsequent compliance validation report by external auditors discovered recurrent noncompliance and serious supervisory concerns in the Paytm arm. Based on this, the central bank imposed a variety of limitations on the bank. Last week, RBI Governor Das stated that all of its actions, including the limits put on Paytm's associate bank, were in the best interests of the public.
"As a responsible regulator and supervisor, we take all actions that promote systemic stability and protect depositors' or customers' interests. These aspects cannot be compromised. Individual entities should consider such issues for their long-term success," Governor Das said.
