The year 2019 seems to have brought good luck to Paytm. After almost six months of the ban, the Reserve Bank of India (RBI) has allowed Paytm Payments Bank to restart opening new accounts for its consumers.
Reportedly, the bank intended to start KYC (Know Your Customer) formalities for its wallets as well as its bank accounts from December 31.
Launched in May 2017, Paytm Payments Bank is a mobile-first bank with zero charges on all online transactions (such as IMPS, NEFT, RTGS) and no minimum balance requirement. For savings accounts, the bank currently offers an interest rate of 4% per annum.
Paytm Payments Bank stopped enrolling new customers on June 20, 2018, following an audit by the RBI, which made certain observations about the process the company follows in acquiring new customers and its adherence to know-your-customer (KYC) norms.
Reports also surfaced that Paytm was modifying its “account opening process to introduce ‘current accounts’ due to which new account creation process had been paused.”
Post the audit, Paytm removed Renu Satti as chief executive of the payments bank following the RBI’s objections about her ability to lead a banking services firm. The RBI mandates the incumbent of a CEO’s position at a payments bank to be a banker. In October 2018, it then appointed veteran banker Satish Kumar Gupta as managing director and CEO for the Payments bank.
Paytm Payments Bank was not the only one to face a ban here. Earlier, Airtel Payments Bank and Fino Payments Bank also faced similar trouble from the RBI-end. The central bank also imposed a fine of $136.9K (INR 1 Cr) on Fino Payments Bank Limited on October 31, 2018, for allegedly opening new accounts despite directions not to do so. The ban on both banks has now been lifted as well.
No such fine has been levied on Paytm Payments Bank by RBI, as stated by a company spokesperson in a media statement.
As said, the RBI decisions were triggered by the low level of deposits by the payments banks. Payments banks in India deposited a total sum of $74.5 Mn (INR 540 Cr) as on May 2018. Airtel Payments Bank deposited $42.3 Mn while Paytm Payments Bank deposited $26.7 Mn (INR 193.68 Cr). The funds deposited by payments banks are much lower than the funds mobilised by large bank branches.
Paytm Payments Bank is reported to have around 42 Mn accounts and has set a target of reaching 100 Mn by the end of 2019. Paytm Payments bank had set an aim to invest $500 Mn in KYC operations in order to reach 500 Mn bank accounts by 2020.
Further, Mukesh Ambani-led Reliance Group’s Jio is also starting with live beta trials for its payments bank services dubbed as Jio Payments Bank.
[The development was reported by ET.]