According to a report, in the coming days, representatives from the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) would meet to formalize the process of moving merchants and customers from Paytm to alternative platforms. Due to regulatory violations, the central bank ordered Paytm Payments Bank to halt its primary banking activities last month. According to the RBI's instruction, Paytm Payments Bank services would cease to exist after February 29.
Paytm Payments Bank has been instructed by the central bank to stop taking deposits or top-ups in all client accounts, including wallets, FASTags, and other devices, after February 29. Paytm Payments Bank's most popular offering is Paytm FASTag, which is used to pay tolls on highways. The Paytm wallet is directly connected to the FASTag service.
The RBI has requested that representatives from NPCI, which manages the Unified Payment Interface (UPI) infrastructure, and NHAI, which runs the Fastag service, take part in the conversation with other stakeholders in order to streamline the process of digital transactions and toll payment, the Economic Times reported on Friday. Next week, the meeting is scheduled to take place prior to the central bank releasing the frequently asked questions (FAQs) on fintech operations.
The RBI announced on February 8 that the FAQs would address a range of questions regarding the functioning of Paytm and Paytm Payments Bank following the regulatory stop.
As per the RBI, repeated non-compliance was the basis for the action taken against Paytm Payments Bank on Thursday. "Supervisory action for persistent non-compliance is being taken. Such action is always preceded by several months, if not years, of bilateral interaction during which we identify the shortcomings and allow time for corrective action to be taken. During the press conference, RBI deputy governor Swaminathan J. stated that it is our responsibility as regulators to safeguard consumers.
The primary reason for the RBI's punitive action against Paytm is the company's lack of compliance with Know-Your-Customer (KYC) verification standards during the onboarding process. In an attempt to address the problem, the RBI penalized Paytm Payments Bank last year, but nothing changed.
"The severity of the circumstance is always taken into account when imposing such limits. As responsible supervisors and regulators, we always act in the best interests of the system's stability as well as the interests of our customers and depositors. These elements cannot be compromised "On Thursday, Governor Das stated.
Since 2018, the RBI has been investigating Paytm Payments Bank. Additionally, it was noted that the bank was authorizing transactions in excess of what was allowed, which sparked worries about potential money laundering.
