The Reserve Bank of India (RBI) on Friday directed the Paytm Payments Bank Ltd (PPBL) to stop taking new customers with immediate effect. This action has been taken on the basis of “certain material supervisory” issues, as per the RBI press release.
The RBI has also ordered the PPBL to appoint an IT audit firm to undertake a thorough and exhaustive audit of its IT system.
“Reserve Bank of India has today, in exercise of its powers, inter alia, under section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank Ltd to stop, with immediate effect, onboarding of new customers. The bank has also been directed to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system,” the press release said.
Regarding onboarding new customers, RBI has directed that Paytm Payments Bank will have to take special permission only after they have reviewed the report by the Income Tax auditors.
In August 2015, Paytm had received a license from the RBI to launch the Payments Bank as a separate entity. It officially began operations in 2017.
Vijay Shekhar Sharma, Founder and CEO of Paytm, owns 51 percent in the PPBL. One97 Communications Limited holds 39 percent and the remaining 10 percent is a joint venture between Vijay Shekhar Sharma and One97 Communications Limited.
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As of April 2021, PPBL had over 64 million customers. In the FY 2020, PPBL made a net profit of INR 29.8 crore.
Back in June 2018, the RBI had ordered PPBL to stop onboarding of new customers after an audit by the central Bank which made certain observations regarding the procedure which the entity followed to bring in new customers as well as its adherence to the Know Your Customer (KYC) norms.
In January 2019, however, PPBL received a green light from the RBI to acquire new customers.
In October 2021, the RBI had fined the PPBL of INR 1 crore as the bank did not provide certain factual information in its application for the issue of final Certificate of Authorisation (CoA).
In a similar action, the RBI had barred lender HDFC from issuing new credit cards in December 2020. The ban was lifted in August 2021.
