NEW DELHI February 16, 2024:In a significant move, the Reserve Bank of India (RBI) has taken action against Paytm Payments Bank Ltd (PPBL) under Section 35A of the Banking Regulation Act, 1949, by imposing certain business restrictions. This decision comes in light of the RBI’s concern for the interests of customers, including merchants, and the larger public interest.
In press releases dated March 11, 2022, and January 31, 2024, the RBI had initially placed business restrictions on PPBL. However, considering the need for customers to make alternative arrangements, the RBI has now issued modified directions under Section 35A, extending the timeline for certain actions.
As per the latest directives:
- Deposit and Transaction Freeze: Effective March 15, 2024 (extended from the initial deadline of February 29, 2024), PPBL is prohibited from accepting further deposits or conducting credit transactions, including top-ups in customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards, etc. Exceptions include interest, cashbacks, sweep-ins from partner banks, or refunds, which may still be credited.
- Withdrawal Freedom: Customers are allowed unrestricted withdrawal or utilization of balances from their accounts, including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc., up to their available balance, with no change in the existing withdrawal conditions.
- Cessation of Banking Services: Except for withdrawals mentioned in point 2, PPBL is prohibited from providing any banking services, including fund transfers (AEPS, IMPS, etc.), BBPOU, and UPI facilities, after March 15, 2024.
- Nodal Account Termination: The Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd, maintained by PPBL, are to be terminated by no later than February 29, 2024.
- Pipeline Transaction Settlement: Settlement of all pipeline transactions in nodal accounts initiated on or before February 29, 2024, must be completed by March 15, 2024. No further transactions are permitted after this date.
In addition to these directives, the RBI emphasizes facilitating seamless withdrawal of customer deposits parked with partner banks under the automatic ‘sweep-in sweep-out’ facility without causing inconvenience to the customers. Withdrawals up to the available balance will be facilitated, excluding accounts and wallets frozen or lien-marked by law enforcement or judicial authorities.
To assist customers and the general public, the RBI has also issued a list of Frequently Asked Questions (FAQs) related to these developments.
The modified directions aim to strike a balance between the regulatory concerns and the convenience of PPBL customers, providing them with a grace period to make alternative arrangements. The RBI will continue to monitor the situation closely to ensure a smooth transition for all stakeholders.
