The Reserve Bank of India (RBI) directed Paytm Payments Bank Ltd. (PPBL) to cease new business transactions by February 29 and settle pipeline transactions by March 15 due to major irregularities in the bank’s compliance with Know Your Customer (KYC) norms. RBI supervisors and external auditors reportedly found KYC details missing for a large number of customers, PAN validation failures in thousands of accounts, and a single PAN used for multiple customers. The bank was also accused of facilitating transactions beyond regulatory limits with minimal KYC requirements, raising money laundering concerns.
Concerns about money laundering arose from deficiencies in KYC processes and the lack of a transaction monitoring system. Several accounts and wallets were frozen due to digital fraud, leading to lakhs of cases. Paytm Payments Bank allegedly did not adhere to the ‘arm’s length policy’ while dealing with Promoter Group Entities and co-mingled financial and non-financial business with promoter group companies. The bank’s dependence on the IT infrastructure of its parent entity, One97 Communications Ltd. (OCL), and non-disclosure of significant intra-group transactions were also noted.
A Paytm Payments Bank spokesperson stated that the recent direction from RBI is part of the ongoing supervisory engagement and compliance process and urged refraining from further speculation.
