RBI takes Action against Paytm Payments Bank Ltd under Section 35A of Banking Regulation Act 1949

The Reserve Bank of India (RBI) in the exercise of its powers under Section 35A of the Banking Regulation Act, 1949, had put certain business restrictions on Paytm Payments Bank Ltd (PPBL or the bank), vide Press Releases dated March 11, 2022, and January 31, 2024.

Keeping in view the interest of customers (including merchants) of PPBL who may require a little more time to make alternative arrangements and the larger public interest, the following Directions are issued by the Reserve Bank of India under section 35A of the Banking Regulation Act, 1949 in partial modification of the earlier Directions dated January 31, 2024:

1. No further deposits, credit transactions, or top-ups will be permitted in any customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards, and so on after March 15, 2024 (an extension of the earlier deadline of February 29, 2024), with the exception of any interest, cashback, sweep ins from partner banks, or refunds, which may be credited at any time.

2. Customers may withdraw or use balances from their accounts, including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, and so forth, without restriction up to their available balance (no change).

3. No banking services, other than those referred in (ii) above, like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc.), BBPOU and UPI facility should be provided by the bank after March 15, 2024 (extended from the earlier stipulated timeline of February 29, 2024). However, for the purpose of (ii) above (viz. for withdrawal or utilisation of available balance by customers or wallet holders), such fund transfers including AEPS, IMPS and UPI may be allowed anytime.

4. Paytm Payments Bank Limited will terminate the Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd as soon as possible, but no later than February 29, 2024 (no change).

5. Settlement of all pipeline transactions in nodal accounts referred to in item (iv) above (for transactions began on or before February 29, 2024) must be completed by March 15, 2024, and no additional transactions will be permitted thereafter (no change).

It is also directed that the bank facilitate withdrawals up to their available balance from all accounts and wallets, with the exception of those that have been frozen or lien flagged by law enforcement or judicial authorities.

Furthermore, the bank is required to support the seamless withdrawal of customer deposits parked at partner banks under the automatic ‘sweep-in sweep-out’ option, without causing any trouble to such customers.