In a move that shook the fintech industry, the Reserve Bank of India (RBI) restricted Paytm Payments Bank's ability to enrol new users and undertake certain transactions. This article delves into the specifics, investigates the potential repercussions, and addresses critical questions for both users and spectators.
The Reserve Bank of India prohibited Paytm Payments Bank Ltd from accepting new deposits and credit transactions across its services on Wednesday due to regulatory violations and supervisory concerns. An audit study identified "persistent non-compliance and continued material supervisory concerns in the bank, warranting further supervisory action," the central bank said in a statement.
Why did the RBI take this decision Regarding Paytm Payments Bank?
The RBI has not stated the particular reasons that prompted its decision. However, conjecture suggests problems with operational processes, technical infrastructure, or regulatory compliance. Paytm Payments Bank had previously encountered similar restrictions, notably in 2022, due to technological issues and system flaws. Paytm Payments Bank could not accept new deposits in any customer accounts after 29 February
According to the RBI, Paytm Payments Bank could not accept new deposits in any customer accounts after 29 February. It further stated that credit transactions, including those made using wallets, would be prohibited. The central bank announced that consumers can withdraw or use their money without limitation. Last month, One 97 Communications, Paytm's parent company, revealed a "slight reduction" in its personnel on Monday as part of cost-cutting efforts without disclosing the number of employees. A corporate representative, however, rejected media allegations at the time that the non-bank lender planned to lose more than 1,000 jobs.
Paytm had an average of 32,798 directly employed employees and 1,589 contracted employees worldwide
"We will be able to save 10-15% on employee costs because Artificial Intelligence (AI) has delivered more than we anticipated," the official told Reuters. According to its annual report, Paytm had an average of 32,798 directly employed employees and 1,589 contracted employees worldwide across its various businesses in the fiscal year ending 31 March 2023.
Paytm Chairman Vijay Shekhar Sharma announced in August 2023 that he would buy a 10.3 percent stake in the company he created from an affiliate of Chinese fintech giant Ant Financial for $628 million (approximately Rs. 5,195 crores), making him the company's single largest shareholder.
Can I still use my Paytm Payments Bank account?
Yes, existing customers can continue using their accounts normally.
Can I open a new Paytm Payments Bank account?
No, new customer onboarding is currently suspended.
Will the restrictions affect my Paytm app?
No, the restrictions only apply to the Paytm Payments Bank, not the Paytm app itself.