Paytm Payments Bank: What you need to know about the RBI directive

The Reserve Bank of India (RBI) has barred Paytm Payments Bank from opening new accounts and issuing new debit cards to customers from March 15, 2024. The directive came after the RBI found that Paytm Payments Bank had violated certain norms related to customer identification and verification. Here are some key points to understand the issue and its implications for customers.

Last month, the RBI had barred Paytm Payments Bank from accepting deposits

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What is Paytm Payments Bank? Paytm Payments Bank is a new type of bank that was launched in 2017 by the digital payments company Paytm. It offers a savings account with no minimum balance requirement, a virtual debit card, and online banking services.

It also invests customers’ deposits only in government bonds, ensuring risk-free returns. Paytm Payments Bank claims to have over 100 million KYC customers, with 0.4 million users added every month.

What did the RBI find wrong with Paytm Payments Bank? The RBI conducted an audit of Paytm Payments Bank in 2023 and found that it had violated some of the licensing conditions and regulatory guidelines. The main issue was that Paytm Payments Bank had not complied with the RBI’s rules on customer identification and verification, also known as KYC (know your customer) norms. The RBI also found that Paytm Payments Bank had shared customers’ data with its parent company and other group entities, which is not allowed under the Payments Bank licence.

What are the consequences of the RBI directive? The RBI has directed Paytm Payments Bank to stop opening new accounts and issuing new debit cards to customers from March 15, 2024.

This means that existing customers can continue to use their accounts and cards, but new customers will not be able to join Paytm Payments Bank until the RBI lifts the restrictions. The RBI has also asked Paytm Payments Bank to submit a compliance report by June 30, 2024, detailing the corrective actions taken to address the violations.
How will this affect Paytm Payments Bank customers? Paytm Payments Bank has assured its customers that their money is safe and secure, and that they can access their accounts and cards as usual.

However, some of the services offered by Paytm Payments Bank may be affected by the RBI directive. For instance, customers may not be able to receive direct benefit transfers (DBT) from the government, such as subsidies and pensions, into their Paytm Payments Bank accounts. Customers may also face issues with setting up or modifying NACH (National Automated Clearing House) mandates, which are used for recurring payments such as EMIs and utility bills. Paytm Payments Bank has advised its customers to link their accounts with another bank for these purposes.

What are the options for Paytm Payments Bank customers? Paytm Payments Bank customers have the option to continue using their accounts and cards, or to close them and transfer their balances to another bank. Paytm Payments Bank has also said that it will refund the annual charges for the debit cards, which were deducted in advance, to the customers who wish to close their accounts.

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Customers can also redeem their fixed deposits, which are held with IndusInd Bank, through the Paytm app. Paytm Payments Bank has also requested its customers to update their email IDs and mobile numbers in their accounts, so that they can receive timely updates and notifications regarding the RBI directive and its impact.

Source : The Indian Express

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