RBI Cancels Licence of Paytm Payments Bank, winding up process begins

The Reserve Bank of India (RBI) has cancelled the banking licence of Paytm Payments Bank Limited, which means the bank can no longer conduct any banking activities or related services from 24th April, 2026.

The RBI will now approach the High Court to begin the process of winding up the bank. However, the bank currently has enough funds to return all the money deposited by its customers when this process takes place.

The RBI has cancelled the banking licence, citing the following concerns:

• The bank conducted its operations in a way that harmed its own interests as well as those of its depositors, resulting in non-compliance with Section 22(3)(b) of the Banking Regulation Act.
• The management of the bank was detrimental to depositors and against public interest, resulting in violating Section 22(3)(c) of the Act.
• Continuing the bank’s operations would not serve any meaningful purpose or benefit the public, as per Section 22(3)(e).
• The bank did not adhere to the conditions mentioned in its licence, leading to a breach of Section 22(3)(g) of the Act.

Previously, the bank was instructed to stop onboarding new customers effective March 11, 2022. Subsequently, on January 31, 2024 and February 16, 2024, additional business restrictions were imposed. These restrictions, among other things, prohibited any further deposits, credits, or top-ups into existing customer accounts, prepaid instruments, wallets, or similar facilities.