RBI Bans Paytm Payment Bank? What is Banned & What is Not

Unfortunately, Paytm has a long history of RBI bans, penalties & rejections. On January 31st, 2024 RBI released a press release stating action against Paytm. After the press release, soon followed a storm of panic among Paytm users and investors. We have seen the effect of this on the share market today as Paytm shares have crashed with a 20% lower circuit. So has RBI banned Paytm? Is Paytm Payments Bank closing? What about current existing users of Paytm Payments Bank? In this article, we have tried to cover all the possible questions & answers you might have about the RBI ban on Paytm.

First of all, let us get this clear. If you have an account in Paytm Payments Bank & you are concerned about your funds, don’t worry. You can transfer your funds even after February 29th, 2024 as well. The restriction is laid on deposits or credit of new funds and not on transfer of existing available balance.

Paytm’s parent company One 97 Communications Limited has also decided to expand its existing relationship with other 3rd-party banks to distribute payments.

As of 1st February 2024, Paytm is barred from onboarding new customers. However, for existing users, the Paytm Payments Bank is still available to use as usual until February 29th.

After February 29th, Paytm Payments Bank Limited (PPBL) cannot do further deposits or credit transactions or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, or NCMC cards, etc.

Also Read: Budget 2024-25 Live Updates

You can transfer your available balance from your Paytm Payments Bank account before or after February 29th through UPI, IMPS or any other fund transfer method. The deadline of February 29th is on deposit/credit and not on fund transfer of available balance.

Yes, many people are getting panicked thinking after February 29th, you cannot withdraw your funds from Paytm Payments Bank. However, that’s not true. The date February 29th suggested by RBI is the last date after which customers cannot deposit/credit/add additional funds in their accounts. But, you can still withdraw/debit your funds only up to the available balance.

This applies to savings accounts, current accounts, PI wallets, FASTags, NCMC cards, etc.

Also Read: Difference between UPI, RTGS, IMPS, and NEFT: Charges & Limit

Yes, you can still use the Paytm app after the RBI ban for UPI or fund transfers as long as you are doing the transactions through your linked 3rd-party bank such as SBI, HDFC, Axis, Kotak, ICICI, etc.

Existing Paytm FASTag customers can still use their available balance. However, the addition of new funds is not allowed anymore to Paytm FASTag after February 29th.

RBI banned Paytm from onboarding new customers to Paytm Wallet back in the year 2022. Existing Paytm Wallet customers can use their available balance. However, onboarding new customers to Paytm Wallet is banned currently & the addition of new deposits is not allowed after February 29th. Note that existing Paytm wallet users can still use their available wallet balance.

No, customers can still use Paytm Money after February 29th. "OCL’s other financial services such as loan distribution, insurance distribution and equity broking, are not in any way related to Paytm Payments Bank Limited and are expected to be unaffected by this direction," says Paytm.

Speaking of Paytm Money, you might want to read our latest article on Sovereign Gold Bonds issue date 2024.

Paytm says that the bank is taking immediate steps to comply with RBI’s guidelines. Going forward, “OCL (Paytm’s parent company) will be working only with other banks, and not with Paytm Payments Bank Limited. The next phase of OCL’s journey is to continue to expand its payments and financial services business, only in partnerships with other banks” Said Paytm on February 1st, 2024. So in the coming days, we might get to see Paytm going in the direction of becoming more of a payments & services company with 3rd-party bank partnerships rather than a payments bank itself.

Paytm says that it will continue to offer its services such as Paytm Soundbox, Paytm QR, Paytm Card Machine etc to offline merchants as usual and the “Paytm Payment Gateway business (online merchants) will continue to offer payment solutions to its existing merchants. We offer acquiring services to merchants in partnership with several leading banks in the country and will continue to expand third-party bank partnerships” the company added further.

But do note, that if you are a merchant (online or offline) who has a Paytm Payment Bank Account where you deposit your funds, the same RBI rules apply to you.

Paytm Payment Bank offers several financial services such as Paytm Loan, Paytm Money (equity broking), Paytm UPI, Paytm QR, Paytm Soundbox, etc. These services will continue to run despite the ban as these services do not come under Paytm Payments Bank Limited. For the quarter ended on December 2023, Paytm has 1.06 Cr subscriptions and has distributed about ₹15,535 Crore loan. Even if Paytm has to say goodbye to its plan of becoming a small bank, it still has built a strong presence in other financial services.

The reason for the RBI ban on Paytm stated in the official press release is “persistent non-compliance and continued material supervisory concerns in the bank.”

No, RBI has not banned Paytm UPI transactions (done through Paytm Gateway & not Paytm Payment Bank) and customers can use Paytm UPI or fund transfer methods like IMPS even after February 29th.

July 2017

RBI cancels Paytm’s Certificate of Authorisation to operate a Payment System. Paytm then transferred its PPI business (Paytm Wallet) to Paytm Payments Bank as permitted by RBI

October 20, 2021

RBI imposes a ₹1 Crore penalty on Paytm Payments Bank for breaking a rule mentioned in Section 26(2) of the Payment and Settlement Systems Act, 2007 (PSS Act). RBI noticed that Paytm Payments Bank Limited (PPBL) had provided incorrect information.

March 11, 2022

RBI releases a press release asking Paytm Payments Bank to stop onboarding new customers right away and appoint an IT audit firm to conduct a comprehensive system audit of the bank’s IT system.

November 6th, 2022

RBI asks Paytm to resubmit its application for (Payment Aggregator) PA license within 120 days and to not onboard new online merchants

October 12, 2023

Reserve Bank of India (RBI) fined PPBL ₹5.39 Crore because the bank did not follow certain rules outlined in the ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016 and allowed IP addresses outside India in its Video-Based Customer Identification Process (V-CIP).

January 31st, 2024

RBI asks PPBL to stop onboarding new customers. Puts a halt on UPI facility, no further deposits, credit transactions, top-ups, wallets, FasTags, NCMC Cards, no fund transfers, after February 29th, 2024.

February 1st, 2024

Paytm released a press release informing its users and investors that the bank is “working on taking immediate steps to comply with RBI directions.” Further adds, “OCL (Paytm’s parent company) to expand its existing relationships with leading third-party banks to distribute payments and financial services products”

So this was all about sharing the latest RBI ban on Paytm from February 29th. Shares of Paytm hit 20% lower circuit of Rs.609 on Thursday’s opening trade, the next day after the RBI press release came out. Earlier in November 2023, Warren Buffett’s Berkshire Hathaway, or BH International, sold its entire 2.46% stake in the company, booking a loss of ₹507 crore on its initial investment.

Later on this month, Softbank entity SVF India Holdings sold another 2% stake in Paytm Payments Bank Limited. The retail investors' share in Paytm’s parent company OCL is on a declining trend. However, the company has presented some positive numbers and growth for the quarter ending in December 2023.

Source: Paytm Investors official website 

Thanks to our active dimers @DeciDeaim & @abhishek012 for first sharing this news with us here:

Paytm Payments Bank Can't Offer Services Including Wallet After 29 Feb 2024

Paytm now tieup with 3rd party banks to continue Paytm Payment Gateway business