India’s RBI orders Paytm Payments Bank to halt banking services by end of February
The Reserve Bank of India (RBI) has ordered Paytm Payments Bank to stop accepting deposits, offering credit services or facilitating fund transfers from 29 February, effectively bringing its banking services to a screeching halt.
Paytm Payments Bank ordered to halt banking services
Paytm Payments Bank has also been told to stop onboarding new customers “with immediate effect” and will need to settle all pipeline transactions initiated on or before 29 February by 15 March.
In a statement, the regulator attributes its latest action to “persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action”.
Paytm Payments Bank is an independently operated subsidiary of Indian fintech One 97 Communications, which also acts as the parent company of digital payments giant Paytm. The payments bank provides nodal accounts to Paytm, in which it holds funds deposited into the fintech’s various payment services, including its digital wallets.
In response to the order, Paytm Payments Bank says it is taking “immediate steps” to ensure its compliance, and is actively collaborating with the RBI to “address their concerns as quickly as possible”.
As for One 97 Communications, the company confirmed that it would now “accelerate” its plans to “completely move to other bank partners”, effectively bringing to an end Paytm’s working relationship with Paytm Payments Bank.
It anticipates that the termination will have “a worst case impact” of between $36.1 million to $60.2 million on its annual EBITDA, yet reiterates that it expects to “continue on its trajectory to improve its profitability”. Its loan distribution, insurance distribution and equity broking services are set to remain unaffected by the order.
