29, February, 2024
HomeIndiaPaytm Payments Bank Faces Regulatory Hurdles as RBI Puts Restrictions on Transactions

Paytm Payments Bank Faces Regulatory Hurdles as RBI Puts Restrictions on Transactions

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In a recent development, the Reserve Bank of India (RBI) has issued a directive to Paytm associate Paytm Payments Bank, instructing it to cease accepting fresh deposits, facilitating credit transactions, and offering fund transfers after February 29.

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Following this announcement, shares of the prominent fintech company, Paytm, experienced a significant downturn of 20% in pre-open trade on Thursday. The stock reached a six-week low of ₹609, according to reports by Reuters.

The RBI’s directive, issued on Wednesday, outlined that Paytm Payments Bank would no longer be permitted to accept fresh deposits, facilitate credit transactions, or offer fund transfers, including the Unified Payments Interface (UPI) facility, after the specified date.

The central bank explicitly stated, “No further deposits or credit transactions or top-ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc., after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime.”

This move follows a prior directive in March 2022, where the RBI had instructed Paytm Payments Bank to cease onboarding new customers. Despite this, a Comprehensive System Audit report and subsequent compliance validation report by external auditors revealed persistent non-compliances and continued material supervisory concerns, prompting the RBI to take further supervisory action without disclosing specific details.

Paytm anticipates a “worst-case impact” of ₹300 crore to ₹500 crore on its annual earnings due to the RBI’s order restricting Paytm Payments Bank from accepting fresh deposits. The company has assured that it is taking immediate steps to comply with the RBI’s directions and remains committed to improving its profitability trajectory.

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In the wake of these regulatory developments, the Indian markets opened higher on Thursday morning ahead of the Interim Budget announcement by Finance Minister Nirmala Sitharaman. As of 9:20 am, the NSE Nifty 50 was 5.95 points or 0.03% higher at 21,731.65, and the S&P BSE Sensex was 6.75 points or 0.01% up at 71,758.86.

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