On Sunday (4th February), the Trader’s body – the Confederation of All India Traders (CAIT) issued a cautionary advisory to traders. In its advisory, it asked traders to switch from Paytm to other payment options for business-related transactions in the wake of RBI’s order against Paytm payments bank (PPB). RBI has barred PPB from onboarding new consumers with immediate effect adding that banking transactions have to be stopped from 29th February.
In the cautionary advisory, the CAIT stated, “The Reserve Bank of India has imposed certain restrictions, prompting CAIT to recommend that users take proactive measures to protect their funds and ensure uninterrupted financial transactions. Large number of small traders, vendors, hawkers, and women are making payments through Paytm, and as such RBI restrictions on Paytm could lead financial disruption to these people.”
The traders’ body also sought action against the PPB if irregularities would be found against it. “CAIT believes that if there is any evidence of fund irregularities, the Enforcement Directorate (ED) should investigate Paytm Payment Bank,” the release added.
In the statement, CAIT National President BC Bhartia and Secretary General Praveen Khandelwal said that the restrictions imposed by RBI on Paytm have raised concerns about the security and continuity of financial services provided by the platform.
Bhartia and Khandelwal urged traders to look into alternate payment methods that are compliant with regulatory guidelines to reduce risk.
Further, Khandelwal also emphasised the urgency of this advisory and urged traders to act promptly. He asked them to make informed decisions to mitigate any potential adverse effects on their financial operations.
The officials further stated that the major reason for the ban on Paytm Payment Bank was the creation of millions of accounts without proper identification.
Khandelwal added, “The process of Know Your Customer (KYC) was not completed for these accounts. Moreover, transactions involving millions of rupees were conducted without proper identification, raising concerns about money laundering.”
RBI’s action against Paytm Payments Bank
Notably, on 31st January, the RBI directed Paytm Payments Bank not 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 was taken over persistent non-compliance and continued material supervisory concerns in the bank, warranting further supervisory action, the RBI had stated in a press release.
News agency PTI citing sources reported that money laundering concerns and questionable dealings of hundreds of crores of rupees between popular wallet Paytm and its lesser-known banking arm had led the Reserve Bank of India to clamp down on the Paytm Payment banks run by Vijay Shekhar Sharma.