Since 2017, Paytm payments bank penalised at least five times by RBI

The payments bank, which commenced operations in May 2017, is not new to controversy and has had run-ins with the RBI on multiple occasions — in the seven years of its existence, the bank has been penalised over compliance issues at least five times by the RBI.

While the central bank’s recent crackdown has made users, merchants and its investors anxious, the RBI is yet to give specific details on what necessitated the action and what the severity of violation at the payments bank was, adding to the travails of users and merchants.

Paytm Payments Bank has been barred from offering almost all of its key services — accepting deposits or top-ups in any customer account, prepaid instruments, wallets, FASTags, National Common Mobility Card (NCMC), etc., after February 29 in the wake of “persistent non-compliances and material supervisory concerns”.

The payments bank had over 7 lakh point of sale (PoS) terminals, 3.52 crore UPI QR codes and 3.23 crore debit cards as of December 2023, RBI data shows. According to the bank’s website, it has over 30 crore wallets and 3 crore bank accounts. It has over 10 crore KYC customers, with 4 lakh users added every passing month. The bank is the largest issuer of FASTag, with over 80 lakh units issued so far.

Allegations of money laundering and foreign exchange violations have also been made against the company. However, Paytm has denied these accusations. “We are not in a position to comment on the issue as Paytm Payments Bank Limited is under the supervisory engagement of the regulator,” a Paytm Payments Bank spokesperson said.

“This is a supervisory action on a regulated entity for persistent non-compliance. Such supervisory actions are invariably preceded by months and, at times, years of bilateral engagement where we not only point out deficiencies but also provide more than adequate time for them to take corrective action,” RBI Deputy Governor Swaminathan J told reporters.

Beyond that, the RBI is yet to offer granular details on what exactly went wrong at the payments bank and has, so far, not offered any commentary on the next course of action. After some prodding from the Finance Ministry, the RBI has, however, said that it will release FAQs about questions surrounding its action sometime next week — after about two weeks of first curbing operations at the bank.

“Bilateral relationship” was a term that was used a number of times by RBI officials when they were posed questions by the media about Paytm’s future.

In fact, even during its past action against the payments bank, the regulator has rarely offered insight into what triggered its action. Only in 2023, when it had imposed a penalty of Rs 5.4 crore on it, had the regulator offered limited commentary, saying it was because of a breach of KYC guidelines.