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RBI bars Paytm Payments Bank from onboarding new consumers with immediate effect, banking transactions to be stopped from 29 February

The action has been taken over persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action, the RBI stated in a press release.

Reserve Bank of India on 31 January directed Paytm Payments Bank to onboard new customers with immediate effect. Moreover, all banking transactions including fund transfers using any mode will be terminated from 29th February. The action has been taken over persistent non-compliance and continued material supervisory concerns in the bank, warranting further supervisory action, the RBI stated in a press release.

The direction was issued by the central bank under section 35A of the Banking Regulation Act, 1949. The bank has also been directed to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system. Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing report of the IT auditors.

As per the directions of RBI, no further deposits or credit transactions or top ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after 29th February, 2024, other than any interest, cashbacks, or refunds which may be credited anytime.

However, withdrawal or utilisation of balances by its customers from their accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc. will be permitted without any restrictions, upto their available balance. Apart from this, any other banking services, like fund transfers, BBPOU and UPI facility can’t be provided by Paytm Payments Bank after February 29, 2024.

The RBI also directed the termination of Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd at the earliest, which must be done before 29th February. “Settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024 and no further transactions shall be permitted thereafter,” the RBI statement added.

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