The regulatory body is reportedly contemplating the cancellation bank licence of Paytm Payments Bank
The Reserve Bank of India will be deploying an administrator to "oversee certain critical aspects" if it decides to revoke the banking licence
It cites a CSA report and subsequent compliance validation report of the external auditors showing persistent non-compliance and continued material supervisory concerns in the bank for the supervisory action
The Reserve Bank of India (RBI) may revoke banking licence of Paytm Payments Bank Limited (PPBL) with less than two weeks to go for the central bank‘s deadline to cease operations.
If this happens, it would be the first time in over 20 years that the RBI would take such an action.
“If that be the case, an administrator could be appointed at the bank to oversee certain critical aspects,” The Hindu Business Line reported, citing sources close to the matter.
This comes close on the heels of the RBI deadline to PPBL to suspend onboarding new customers, starting March 15.
The decision comes at the behest of the Paytm Payments Bank repeatedly flouting the RBI’s guidelines. The report also said that owing to RBI mentioning in the FAQ dated February 16 that no credits can be made to Paytm Payment Bank’s savings account, “the bank is unlikely to be in existence for long.”
A Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliance and continued material supervisory concerns in the bank, warranting further supervisory action, the RBI said.
It is pertinent to note that government scrutiny of the bank has also resulted in a monetary penalty of INR 5.49 Cr by the Financial Intelligence Unit-India (FIU-IND) for violations of its obligations under the Prevention of Money Laundering Act (PMLA) on March 1.
PPBL received an in-principle approval from the central bank to set up a payments bank in 2015 and was formally inaugurated in 2017.
While RBI is mulling to revoke the payment bank licence, the fintech major has severed ties with the bank. On March 1, Paytm announced that it had mutually agreed to discontinue various inter-company agreements with PPBL.
Moreover, Paytm founder and chief executive officer (CEO) Vijay Shekhar Sharma has also resigned from the position of part-time non-executive chairman and board member of Paytm Payments Bank on February 26.
