RBI Probes More Payments Banks for Money Laundering After Paytm Crackdown

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The Reserve Bank of India (RBI) is investigating several other payments banks for possible violations of anti-money laundering norms, after it took action against Paytm Payments Bank for non-compliance, according to a report by The Economic Times. The central bank has asked the payments banks to submit details of their transactions, customer verification processes, and compliance systems, the report said.
RBI headquarters in Mumbai (PTI FILE)

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The RBI had ordered Paytm Payments Bank, the largest issuer of FASTags and the banking arm of India’s leading fintech company Paytm, to stop accepting deposits or top-ups in any customer account, wallet, FASTag, or other instrument after February 29, 2024. The RBI also directed the bank to close the nodal accounts of its parent company One97 Communications and Paytm Payments Services by the same date.

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The RBI said that the action was taken due to “persistent non-compliances and material supervisory concerns” with the bank, which has over 100 million KYC verified customers. The RBI found that the bank had violated several rules, such as using a single identity document to register thousands of customers, allowing transactions beyond regulatory limits in minimum-KYC accounts, and failing to disclose material transactions to the RBI.

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The RBI’s move has raised questions about the future of Paytm’s core business model, which relies heavily on its payments bank and wallet services. Customers can still withdraw or use the balances from their Paytm accounts, but no other banking services, such as fund transfers, BBPOU and UPI facility, should be provided by the bank after February 29, the RBI said.
Paytm Payments Bank, which was once the poster boy of India’s fintech revolution, has not issued any statement on the RBI’s directive. The bank’s founder and chairman Vijay Shekhar Sharma is also part-time chairman of the bank
Source : Hindustan Times

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