The Central Bank of India (RBI) in an attempt of its power of regulation has asked Paytm Payments Bank to stop credit entry in any customer accounts including wallets and other pre-paid instruments such as FASTags, NCMC( National Common Mobility Cards) used in Metro from March 1.

RBI has also ordered the bank to stop operating unit services under Bharat Bill Pay of fund transfers on any name after Feb 29.

RBI accounts for its action to non-compliance and continued material supervisory concerns calling for a supervisory action further.

The Central Bank revealed that after it had barred Paytm Payments Bank from bringing in new customers in March 2022 but it still remained non-compliant.

RBI has ordered the nodal accounts of One97 Communications and Paytm Payments Service to not operate after the last day of Feb, 2024.

The disciplinary measures seem to be different in kind and it shall affect the financial services industry, app users as well as the wider merchant community that uses the Paytm network for processing payments.

Customers using the Paytm application for UPI payments and where the underlying bank account might with be a different bank shall continue to function normally but those using the bank account will have to stop doing so from February, 29.

Other services of Paytm like products across travel, movie tickets, and others will continue uninterrupted as before.

Many small enterprises that use Paytm for salary payments might face major issues. The payments bank is part-owned by One 97 Communications while the app is owned by One 97.

Paytm Payments Bank must stop accepting deposits and credit transactions further. Existing customers will not be allowed to add money to the Paytm bank accounts.

RBI in order to ensure that the consumers do not get stuck, RBI has allowed withdrawal and utilization until a credit balance is achieved. However, adding new funds shall be prohibited thereafter.

It's not that the Central Bank is doing it for the first time. It has meted out harsh penalties earlier too. It had stopped HDFC Bank from issuing credit cards. It also stopped Mastercard and American Express from issuing new cards because of data localization infringements.

All the settlements regarding the Paytm Payments Services shall not be permitted after 15th March.

Overall, the fintech major has faced multiple hiccups on its route to becoming a full financial service player. The company did not manage to get a payment aggregator license either through rivals RazorPay and Cashfree last year. China's shareholding in the company also is being attributed to these setbacks.

It holds paramount importance for any business enterprise to store data within the territory of India and protect its users. Seemingly, this action of RBI has been taken with a couplet of data security and national security.

Reference:-

• timesofindia.indiatimes.com
• m.economictimes.com

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