The regulatory agency is reportedly considering canceling the bank license of Paytm Payments Bank. If the Reserve Bank of India decides to cancel the banking license, it will assign an administrator to “oversee certain critical aspects.” It cites a CSA report and subsequent compliance validation report of the external auditors revealing repeated noncompliance and ongoing material supervisory concerns in the bank for the supervisory action.
According to the Inc42, the Reserve Bank of India (RBI) may revoke Paytm Payments Bank Limited’s (PPBL) banking license within less than two weeks until the central bank’s deadline to discontinue operations.
If this occurs, it will be the first time the RBI has taken such action in well over two decades.
“If that is the case, an administrator could be appointed at the bank to oversee certain critical aspects,” The Hindu Business Line stated, citing persons familiar with the situation.
This comes shortly after the RBI’s deadline for PPBL to halt the onboarding of new clients beginning March 15.
According to the Inc42, the decision was made at the insistence of Paytm Payments Bank, which has consistently violated the RBI norms. The report also stated that because the RBI stated in the February 16 FAQ that no credits can be issued to Paytm Payment Bank’s savings account, “the bank is unlikely to be in existence for long.”
A comprehensive system audit report and the following compliance validation report by external auditors indicated continuous noncompliance and serious supervisory issues in the bank, necessitating further supervisory action, according to the RBI.
It is worth noting that the Financial Intelligence Unit-India (FIU-IND) imposed a monetary penalty of INR 5.49 crore on March 1 for violations of its commitments under the Prevention of Money Laundering Act (PMLA), according to the Inc42.
The central bank gave PPBL in-principle authority to establish a payments bank in 2015, and it was formally opened in 2017.
While the RBI considers revoking the payment bank’s license, the fintech giant has terminated connections with the bank. On March 1, Paytm said that it and PPBL had mutually agreed to terminate several inter-company agreements.
Furthermore, Paytm founder and CEO Vijay Shekhar Sharma resigned from his position as part-time non-executive chairman and board member of Paytm Payments Bank on February 26.
