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The operations of Paytm Payments Bank have been completely stopped from today 24th April. The Reserve Bank of India has canceled the banking license of Paytm Payments Bank Limited (PPBL) with immediate effect.
RBI said that the functioning of the bank did not ensure that customers’ money was safe. However, the UPI app will continue to run as before.
RBI has said that Paytm Payments Bank has enough cash that it can refund the deposits of all its customers during the bank closure process. This means that depositors are unlikely to lose money.
RBI ordered closure of Paytm Payments Bank.
What will be the impact of this decision
If you are running Paytm UPI by linking it to any other bank (like SBI, HDFC etc.), then UPI will continue to work.
But if Paytm Payments Bank was your base account then you will have to shift it to another bank. You can withdraw the money deposited in this bank.
RBI gave 4 reasons for canceling the license
- Loss of customers: Due to the way the bank was working, the money of the people depositing there was not safe.
- Management negligence: The attitude and decisions of the officials running the bank were not in the benefit of the general public and the account holders.
- No use continuing: The Reserve Bank felt that running this bank further would not bring any benefit to the public, but would only increase the risk.
- Terms broken: The promises and rules (such as KYC and proper use of funds) that the bank had agreed to while obtaining the license were repeatedly violated.
Paytm shares fall after license cancellation
On Friday, a decline was seen in the shares of Paytm’s parent company ‘One 97 Communications’ in the stock market. Shares of Paytm fell 0.5% to close at Rs 1,153 per share. The impact of the news of cancellation of banking license may be seen more on the stock in the coming days.
Paytm Bank was on RBI radar since 2022
The strictness of the Reserve Bank on Paytm Payments Bank is quite old. It started in March 2022, when RBI stopped the bank from adding new customers. After this, in January 2024, the bank was also stopped from taking new deposits due to violation of rules and flaws in Customer Due Diligence (KYC).
Since then the bank was limited to only limited activities like withdrawal of old deposits and loan referral.
License was obtained in 2015, had support from big investors
Paytm Payments Bank received a limited banking license in August 2015. Under this, the bank could accept small deposits, but was not allowed to give loans directly. This bank was backed by One 97 Communications, which included big investors like China’s ‘Ant Group’ and Japan’s ‘SoftBank’.
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