RBI Seeks Dismissal Of PIL Against Paytm Payments Bank’s Postpaid Feature

The Reserve Bank of India (RBI) on Thursday has sought the dismissal of the public interest litigation against the Paytm Payments Bank saying it can’t be used as a weapon to challenge the financial or economic decisions taken by the government or the RBI.

RBI’s response came after a PIL was filed by Abhijit Mishra before a bench of Chief Justice D N Patel and Justice C Hari Shankar in May. The PIL filed through advocate Payal Bahl submitted that Paytm Payments Bank Limited was granted a payments bank license under Section 22 of the Banking Regulation Act, 1949 by the RBI in January 2017. The PIL said that these guidelines do not allow credit or loan disbursement activities or products as authorised activities for a payments bank.

With this, the petition said that its postpaid wallet is illegal and contrary to the banking laws and regulations. The petitioner also said that, in its RTI query, the RBI clarified that the Paytm Payments Bank never informed or notified the banking regulator about the operations of the postpaid wallet.

The Delhi High Court bench headed by Chief Justice Rajendra Menon asked the RBI and Paytm Payments Bank to clarify their stands on the PIL.

Attempt To Misguide The Court?

RBI has now said that section 22 of the Banking Regulation Act empowers the RBI to issue banking licence to a company to carry on banking business in India, subject to certain conditions provided in this provision.

“Upon an application made in this behalf by respondent 2 (Paytm), a licence to carry on banking business in the style of a ‘payments bank’ has been issued by the RBI subject to certain conditions enumerated in the licence itself. These conditions along with the operating guidelines issued by the RBI, specify the broad contours within which a payments bank is required to operate, strictly adhering to the same,” it said.

Seeking dismissal of the plea, the central bank said Mishra has sought the relief against Paytm but he has made RBI the first party as he might be aware that a PIL would not lie against a private body and is indirectly attempting to misguide the court.

“For initiating action under the relevant provisions of the BR Act, RBI has to satisfy that Paytm has acted in such a manner which is detrimental to the interests of the depositors. No action can be initiated solely on the baseless allegation of the petitioner. Hence, no relief should be granted to him,” RBI said in its affidavit.

Paytm’s Opposition Of The PIL

Paytm also opposed the petition claiming that the plea was based on incorrect facts and incorrect understanding of law.

In its response, Paytm said the the company application is owned by One97 Communications Ltd which was engaged in the business of providing payment solutions, providing services related to electronic payments and selling of digital good on its mobile application. It also said Paytm Payments Bank Ltd does not own or operate the Paytm application and merely uses the technology and platform services of the application pursuant to a service agreement with One97 which owns the application.

Regarding the Paytm postpaid facility, it said the facility is being provided by Clix Finance India which is a NBFC and is in the business of providing loans/credit facility. The affidavit added that Paytm Payments Bank Ltd shares only the KYC Id (Know Your Customer identity) with Clix and not any personal or sensitive information of the customers.

“On availing the Paytm postpaid facility the disbursed amount is not credited to the customers wallet or bank account but it gets reflected in the loan books of Clix as it is a facility being provided by Clix to its customers. This is explicitly clear that Paytm Payments Bank Ltd is not providing any credit facilities/ loans to its customers,” Paytm added.

The court has now listed the matter for further hearing on September 18.