Understanding the Reasons Behind RBI's Ban on Paytm Payment Bank

Paytm Payment Bank (PPBL), a prominent player in India's digital banking landscape, recently faced a ban from the Reserve Bank of India (RBI). Let's delve into the reasons behind this unprecedented move.

[{"selector":"#anim-f878dcf0-8108-401d-94c6-fb89bc35013c","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-078c2bfb-5f5c-49be-80f7-13faec6debd1","keyframes":{"transform":["translate3d(0px, 211.11112%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-40034067-256b-4531-88c2-e2b8b8752b07","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-fa7b912b-5f8c-4d20-bbd7-dc25545f17c5","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-31ac4cc9-6834-4e2c-92ff-0c7915a22dc5","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}]

RBI found discrepancies in the bank's adherence to Know Your Customer (KYC) norms and Anti-Money Laundering (AML) guidelines.

[{"selector":"#anim-220d7865-ccc2-46f9-b3e1-a04e40ea5a1c","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-f01750a6-0151-42c3-984d-8dc97fd9532a","keyframes":{"transform":["translate3d(0px, 305.70989%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-9c9eff9c-0511-403f-a99d-648ca7ba6c83","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-3ae9b361-48d5-4dd2-bbb0-52b31c6882eb","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-589ce3dc-ebee-4115-bd15-1cba5669b308","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}]

The RBI found that in thousands of cases the same PAN was linked to more than 100 customers and in some cases for more than 1,000 customers.

[{"selector":"#anim-6460d2f6-3a1c-4c7e-8a61-b627e97bb149","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-fbd21fdd-b40c-4d52-acb5-0e4e23542d4e","keyframes":{"transform":["translate3d(0px, 257.43993%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-97d82d9c-9425-43c9-98e8-1c618afb9da4","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-1e82beff-1936-4bcb-bf20-c9ef0d19dc20","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-cfa6cc77-1e09-44f7-929c-9fcb3c60dd8b","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}]

The RBI also found an unusually high number of dormant accounts which are prone to have been used as mule accounts. Out of about 35 crore wallet accounts Paytm maintains, 31 crores being inoperative.

[{"selector":"#anim-96ea03b0-28da-4f19-94c8-2b630230c954","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-3394d139-ca64-453e-ac8b-3968d1a0908c","keyframes":{"transform":["translate3d(0px, 194.78859%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-1e4da70c-7079-4978-83b9-0523342743f2","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-c53a700e-9d73-469a-b927-8156f3c05414","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-10537037-5501-4319-935a-dfca6f811aef","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}]

RBI has directed PPBL to stop accepting deposits or top-ups in customer accounts, wallets, FASTags, and other instruments after February 29, 2024.

[{"selector":"#anim-08bd2c99-3255-426d-8232-fbcce14b407d","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-6c818b59-39c2-4386-9e44-5969b8a30273","keyframes":{"transform":["translate3d(0px, 257.43993%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-11cc1e12-ca66-4789-8917-9a14ad103364","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-2e199764-0fae-499e-ae22-4a923dc0bbfa","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-91571a84-847f-4192-a452-b545a947a9ab","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] Learn more

The ban on PBBL exposed customers to serious risk, leading to a sharp drop of 36% from January 31st to February 2nd, 2024 in One97 Communications Ltd (owner of Paytm Brand) shares.

[{"selector":"#anim-9ac42f0c-103f-4cd6-ad1a-67071aed47be","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-557600f2-5e60-48d9-ab95-65e8993c0f9e","keyframes":{"transform":["translate3d(0px, 221.21718%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-dd3d14c2-6483-4846-abfb-4d77d1e1c292","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-0ad0299c-df94-4690-a18c-19b427044dfc","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-a5bd3290-20e9-4514-bac2-5e9e42014d03","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}]

The ban is a stark reminder of the importance of regulatory compliance. Financial institutions must prioritize adherence to regulatory guidelines to avoid sanctions and maintain operational integrity.

[{"selector":"#anim-ca44fd66-8517-44de-9f15-0c47b986d282","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-c1f9c0f9-608a-42f0-ba6b-56b557a79d73","keyframes":{"transform":["translate3d(0px, 189.92132%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-d3d6559a-34aa-4101-8a99-a1b82b6506ec","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-b42a067b-21b0-43c9-86e0-43c878b8b6ad","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-37cb3804-25b5-47fe-8848-e709fea5130c","keyframes":{"transform":["scale(1)","scale(1.5)","scale(0.95)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}]

[{"selector":"#anim-03fbd5ac-f67b-42b5-9ff2-9fe993157fe4","keyframes":{"opacity":[0,1]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] [{"selector":"#anim-364e6377-9e65-470a-b7b8-b6ff4d184a9d","keyframes":{"transform":["scale(0.3333333333333333)","scale(1)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}] Read More story Read more