Potential Revocation of Paytm Payments Bank's Banking License by RBI

With less than two weeks left until Paytm Payments Bank Limited (PPBL) ceases its operations, recent reports from the Hindu Business Line indicate that the Reserve Bank of India (RBI) is contemplating an unprecedented move to revoke the bank's license. If this course of action proceeds, it would signify the first instance in over two decades where the banking regulator has taken such a significant step.

Sources suggest that the RBI might appoint an administrator to oversee critical functions of the bank, as disclosed in the aforementioned report.

The decision by the RBI appears to be prompted by a series of lapses in due diligence by the banking arm of the renowned payment platform, Paytm. On March 1, One97 Communications (OCL), the parent company of Paytm, approving the discontinuation of several inter-company agreements with Paytm Payments Bank.

Previously, on January 31, the RBI imposed restrictions on PPBL's business operations, citing recurrent violations of regulatory norms and non-compliance with various rules. Consequently, the banking regulator barred PPBL from accepting fresh deposits and engaging in credit transactions after February 29.

Although the initial deadline was slated for February, it was later extended to March 15.

The RBI referred to a Comprehensive System Audit report and subsequent compliance validation report from external auditors, underscoring persistent non-compliance and ongoing material supervisory concerns within the bank. These revelations necessitated further supervisory actions, as stated in the RBI's announcement.