RBI Restricted Paytm Payment Bank From Onboarding New Customers

On Friday, 11 March 2022, The Reserve Bank of India (RBI) has directed Paytm Payment Bank to halt onboarding new clients with immediate effect.

RBI Tweeted, "Action against Paytm Payments Bank Ltd under section 35 A of the Banking Regulation Act, 1949"

According to a statement on the regulator's website, the action was taken in response to "significant supervisory concerns" at the payments bank. The RBI, on the other hand, did not disclose any more information. Section 35A of the Banking Regulation Act was used to impose the restriction.

RBI in its press releases said, "The RBI has today, in exercise of its powers, inter alia, under section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank Ltd to stop, with immediate effect, onboarding of new customers."
Furthermore, ''The bank has also been directed to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system. Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing report of the IT auditors," RBI Press release said.

As per the RBI, This action is based on certain material supervisory concerns observed in the bank.

Section 35A empowers the regulator to restrict any financial company from acting in a way that is harmful to depositors' interests. Customers can make deposits with a payments bank. It is not, however, permitted to extend any loans from its balance sheet.