Citing persistent non-compliance and regulatory concerns, the Reserve Bank of India has ordered Paytm Payments Bank Ltd., a division of One 97 Communications Ltd., to cease providing mobile wallet services and other associated operations. The business, which processes payments for Paytm, the largest digital payments platform in India, is required by the authorities to stop its banking activities by February 29.
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What effect does it have on customers?
As to the RBI, current clients are free to utilise their prepaid cards or wallets and retrieve their monies without any restrictions.
Setback following setback
The latest action was taken nearly two years after the regulatory authority, as reported by Bloomberg News, forbade the bank from obtaining new customers because it had not complied with certain regulations. Founder Vijay Shekhar Sharma claimed at the time that the bank complied with all Indian laws.
The bank, which functions under a limited licence that limits lending but permits deposits up to 200,000 rupees ($2,408.4) per account, has been directed by the Reserve Bank of India (RBI) to stop accepting new clients until its information technology system has passed a comprehensive examination.
The bank’s problems seemed to get worse on Wednesday after the regulatory body harshly criticised its business practices.
On its website, the RBI declared that independent auditors had conducted a thorough analysis of the bank’s policies and processes. They found serious problems and repeated violations of the law that alarmed supervisors and required further oversight.
The bank will not be able to take any further deposits or process credit transactions after February 29th. Additionally, it won’t be able to add money to any wallets, cards for road toll payment, prepaid devices, or customer accounts. Refunds, cashbacks, and interest can all still be credited at any moment.
Furthermore, as per the directives of the Reserve Bank of India (RBI), the special accounts that were created for settlement purposes by One97 Communications Ltd. and Paytm Payments Services Ltd.’s parent company must be closed as soon as feasible and no later than February 29. The RBI underlined once more that any outstanding payments have to be completed by March 15.