One of the most popular Indian fintech companies, Paytm Payments Banks, is in hot waters. The RBI has restricted Paytm from accepting fresh deposits in its Payment bank or wallet after 29 February 2024. But why has RBI taken such a step? Let’s discuss this in detail.
Paytm Payments Bank Stop Working After Feb 29
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On Wednesday, RBI restricted Paytm from accepting fresh deposits, offering fund transfers, facilitating credit transactions, and including the Unified Payments Interface (UPI) after 29 February 2024. RBI has directed that no further deposits or credit transactions will happen in any customer account, wallet, prepaid instruments, FASTags, NCMC cards, etc., after 29 February. Further, it said its customers could utilize the available balance in savings bank accounts, prepaid instruments, current accounts, FASTags, and National Common Mobility Cards without restriction.
Why has RBI put restrictions on Paytm Payments Bank?
The actions have been taken against the Paytem payments banks as per section 35A of the Banking Regulation Act, 1949. RBI said it asked Paytm in March 2022 to stop adding new customers to its payment bank. Still, a third-party audit report has indicated noncompliance with the regulation, so it needs further supervisory action.
Response of Paytme on RBI’s restriction
The company, association of the One 97 Communications Limited, has said that they have immediately taken action to comply with the RBI guidelines. The company further added that OCL works with various partner banks and not only with the Paytm payments bank on various fintech products.
The company is accelerating the plan to move with other banks ultimately, and now the company will work in partnership with other banks and not with the paytm payments bank.
The company has confirmed that in the worst-case scenario, it will suffer from a loss of Rs 300 crore to Rs 500 crore due to the restriction put by RBI on its payment bank. However, the company has said it will continue working on its trajectory to improve its financial situation.
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