Paytm Disaster & RBI Hammer:

RBI has taken caustic actions on PPBL (Paytm Payment Bank Limited) & restricted them from taking new deposits into their accounts or digital wallets effective from February 29, 2024. This is being looked at as a significant action by the regulator, setting an example that rules and regulatory guidelines are of prime importance, while promoting financial inclusion in the country. These restrictions by RBI are going to be the hard pills to swallow for Paytm, who are looking at a dent of approximately 60 million USD to their annual earnings.

Paytm, PPBL & One97: What is the link?

PPBL (Paytm Payment Bank Limited) was launched in 2017. 49% of the entity is owned by Indian technology entrepreneur Mr. Vijay Shekhar Sharma and the remaining 51% entity is held by One97 Communications.

The license was issued by RBI with an aim of propagating financial inclusion by introducing a few banking services, payment services, promotion of cashless payments & supplement the digital transactions, rather than credit services.

RBI’s Directions vide Press Release: 2023-2024/1895:

On 16^th February 204, Reserve Bank of India, posted on their website, outlining below actions on PPBL.

i.  No further deposits or credit transactions or top ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards, etc. after March 15, 2024 (extended from the earlier stipulated timeline of February 29, 2024), other than any interest, cashbacks, sweep in from partner banks or refunds which may be credited anytime.

ii. Withdrawal or utilisation of balances by its customers from their accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc. are to be permitted without any restrictions, upto their available balance (no change).

iii. 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.

iv. The Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd maintained by Paytm Payments Bank Limited are to be terminated at the earliest, in any case not later than February 29, 2024 (no change).

v. Settlement of all pipeline transactions in nodal accounts referred to in item (iv) above (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024 and no further transactions shall be permitted thereafter (no change).

vi. It is also directed that withdrawals upto their available balance should be facilitated by the bank from all accounts and wallets, excluding the ones that are frozen or lien marked by Law Enforcement or judicial authorities.

vii. Further, it is directed that the bank shall facilitate a seamless withdrawal of customer deposits that are parked with partner banks under the automatic ‘sweep-in sweep-out’ facility without causing any inconvenience to such customers.

Reason of business restrictions

RBI has taken actions on PPBL vide powers under Section 35A of the Banking Regulation Act, 1949.

• RBI has indicated “Non-compliance” & “Material supervisory Concerns” as the reason of the clampdown on PPBL.
• Reportedly, in March 2022, PPBL were directed by the regulator to stop registering new customers.
• Subsequently, RBI became aware of persistent non-compliances & supervisory concerns and had given required time to PPBL to clarify such issues, but in vain.

Market Reaction:

One day after RBI imposed the restrictions, paytm stocks went down by 20%, only to recover after the management’s outreach to public in addition to achieving a deal with Axis bank as new banking partner in lieu of PPBL.

What’s in it for Common man? RBI FAQs:

1. I have a savings or current account with Paytm Payments Bank. Can I continue to withdraw money from this account after March 15, 2024? Can I continue to use my debit card issued by Paytm Payments Bank?

Yes. You can continue to use, withdraw or transfer your funds from your account upto the available balance in your account. Similarly, you can continue to use your debit card to withdraw or transfer funds upto the available balance in your account.

2. I have a savings bank or current account with Paytm Payments Bank. Can I deposit or transfer money into this account after March 15, 2024?

No. After March 15, 2024, you will not be able to deposit money into your account with Paytm Payments Bank. No credits or deposits other than interest, cash-backs, sweep-in from partner banks or refunds are allowed to be credited.

3. I am expecting a refund in my account with Paytm Payments Bank after March 15, 2024. Can this refund be credited into my account?

Yes. Refunds, cash-backs, sweep-in from partner banks or interest are permitted credits into your account even after March 15, 2024.

4. What will happen to the Deposits maintained with partner banks through ‘sweep in/out’ arrangements, after March 15, 2024?

The existing Deposits of Paytm Payments Bank customers maintained with partner banks can be brought back (sweep-in) to the accounts with Paytm Payments Bank, subject to the ceiling on balance prescribed for a Payments Bank (i.e. ₹2 lakh per individual customer at the end of day). Such sweep-ins for the purpose of making available the balances for use or withdrawal by the customer will continue to be allowed. However, no fresh deposits with partner banks through Paytm Payments Bank will be allowed after March 15, 2024.

5. My salary is credited into my account with Paytm Payments Bank. Can I continue to receive my salary into this account?

No. After March 15, 2024, you will not be able to receive any such credits into your account with Paytm Payments Bank. It is suggested that you make alternative arrangements with another bank before March 15, 2024 to avoid inconvenience.

6. I receive a subsidy or certain direct benefit transfers linked to my Aadhar from the Government in my account with Paytm Payments Bank. Can I continue to receive it into this account?

No. After March 15, 2024, you will not be able to receive any such credit into your account with Paytm Payments Bank. Please arrange to change your linked account to another bank before March 15, 2024 to avoid any inconvenience or disruption.

7. My monthly electricity bill is paid automatically from my bank account with Paytm Bank Limited? Can this continue?

Withdrawal/debit mandates (such as National Automated Clearing House (NACH) mandates) will continue to get executed till there is balance available in your account. However, after March 15, 2024, credit or deposit in your accounts will not be allowed. Therefore, to avoid inconvenience, it is suggested that you make alternative arrangements through another bank, before March 15, 2024.

8. My monthly OTT subscription is paid automatically through UPI from my bank account with Paytm Payments Bank? Can this continue?

Withdrawal/debit mandates through automatic UPI mandates will continue to get executed till there is balance available in your account. However, after March 15, 2024, credit or deposit in your accounts will not be allowed. Therefore, to avoid inconvenience or disruption, it is suggested that you make alternative arrangements through another bank, before March 15, 2024.

9. The instalment (EMI) for my loan is automatically paid through my account with Paytm Payments Bank. Can this continue?

Auto debit mandates will continue to get executed till there is balance available in your account. However, after March 15, 2024, credit or deposit in your accounts will not be allowed. Therefore, to avoid inconvenience, it is suggested that you make alternative arrangements for setting up EMI payments through another bank before March 15, 2024.

10. The instalment (EMI) for my loan is automatically paid through my account with a bank other than Paytm Payments Bank. Can this continue?

Yes, EMIs registered with any bank other than Paytm Payments Bank can continue.

11. I have a wallet with Paytm Payments Bank. Can I continue to use money from this wallet after March 15, 2024?

Yes. You can continue to use, withdraw or transfer to another wallet or bank account upto the balance available in the wallet. Minimum KYC wallets¹ can, however, be used only for merchant payments.

12. I have a wallet with Paytm Payments Bank. Can I top-up or transfer money into this wallet after March 15, 2024? Can I receive money from any other person into this wallet after March 15, 2024?

No. After March 15, 2024 you will not be able to top-up or transfer money into the wallet or receive any credits, other than cashbacks, or refunds into this wallet.

13. I have a cashback due in my wallet with Paytm Payments Bank. Can I receive this cashback after March 15, 2024?

Yes. Refunds and cashbacks are allowed to be credited.

14. I have a wallet with Paytm Payments Bank. Can I close this wallet and have the balance transferred to my bank account with another bank?

Yes. You may approach Paytm Payments Bank or use its banking app to close your wallet and transfer the balance to an account maintained with another bank in the case of full KYC wallets. In the case of minimum KYC Wallets, you may use the available balance or request for a refund.

15. I have a FASTag issued by Paytm Payments Bank. Can I continue to use it to pay toll after March 15, 2024?

Yes. You can continue to use your FASTag to pay toll upto the available balance. However, no further funding or top ups will be allowed in the FASTags issued by Paytm Payments Bank after March 15, 2024. It is suggested that you procure a new FASTag issued by another bank before March 15, 2024 to avoid any inconvenience.

16. I have a FASTag issued by Paytm Payments Bank. Can I recharge the balance after March 15, 2024?

No. After March 15, 2024 you will not be able to top-up or recharge your FASTag issued by Paytm Payments Bank. It is suggested that you procure a new FASTag issued by another bank before March 15, 2024 to avoid any inconvenience.

17. Can I transfer the balance from my old FASTag issued by Paytm Payments Bank to a new FASTag obtained from another Bank?

Credit balance transfer feature is not available in the FASTag product. Therefore, you will have to close your old FASTag issued by Paytm Payments Bank and request the bank for a refund.

18. Can I transfer my money into my Paytm Payments Bank account through UPI/ IMPS after March 15, 2024?

No. You cannot transfer the money into your Paytm Payments Bank account after March 15, 2024.

19. Can I withdraw my money from my Paytm Payments Bank account through UPI/ IMPS after March 15, 2024?

Yes. You can withdraw your money from Paytm Payments Bank account through UPI/ IMPS upto the balance available in your account.

20. What is the status of the Business restriction placed on Paytm Payments Bank vide RBI Press Release dated March 11, 2022?

The business restriction dated March 11, 2022, prohibiting Paytm Payments Bank from onboarding any new customers for any of its services continues to be in force. Hence, Paytm Payments Bank cannot onboard any new customers after March 11, 2022.