RBI’s Action against Paytm Payments Bank Ltd.

Posted On - 1 May, 2024 • By - King Stubb & Kasiva

In accordance with its authority under Section 35A of the Banking Regulation Act, 1949, the Reserve Bank of India (“RBI”) imposed certain business restrictions on Paytm Payments Bank through Press Releases issued on March 11, 2022, January 31, and February 16, 2024. As of March 15, 2024, Paytm Payments Bank is no longer permitted to accept further credits into its customer accounts and wallets. Consequently, certain additional measures have been deemed necessary to ensure uninterrupted digital payments via UPI customers using the ‘@paytm’ handle operated by Paytm Payments Bank and to mitigate concentration risk in the UPI system by fostering multiple payment app providers. These additional steps include:

  • Advising the National Payments Corporation of India (“NPCI”) to assess One97 Communication Ltd’s (“OCL”) request to become a Third-Party Application Provider (“TPAP”) for UPI channel to sustain UPI operation of the Paytm app, subject to norms.
  • Directing NPCI that in the event of granting TPAP status to OCL, it may be mandated that ‘@paytm’ handles are seamlessly migrated from Paytm Payments Bank to a newly identified set of banks to prevent disruptions. No new users are to be added by the TPAP until all existing users are satisfactorily migrated to a new handle.
  • Facilitating NPCI to certify 4-5 banks as Payment Service Provider (“PSP”) Banks with demonstrated capabilities to process high-volume UPI transactions for seamless migration of ‘@paytm’ handle to other banks, aligning with NPCI norms for minimizing concentration risk.
  • For merchants using PayTM QR Codes, OCL may open settlement accounts with one or more PSP Banks (excluding Paytm Payments Bank).

It is clarified that the migration of UPI handles applies only to customers and merchants with a UPI handle ‘@Paytm’. Customers whose underlying account/wallet is currently with Paytm Payments Bank are advised to make alternative arrangements with other banks well before March 15, 2024, as previously advised in the FAQs released by RBI on February 16, 2024.

Furthermore, holders of FASTag and National Common Mobility Cards issued by Paytm Payments Bank are urged to make alternative arrangements before March 15, 2024, to avoid inconvenience.

These actions are undertaken solely in the interest of safeguarding customers and the payment system from potential disruptions and are without prejudice to any regulatory or supervisory actions initiated by RBI against Paytm Payments Bank.