The Reserve Bank of India (RBI) on Thursday placed restrictions on Paytm Payments Bank, which will take effect on February 29, in response to an alleged case of “persistent non-compliance.” New deposits and credit transactions on the platforms will be impacted by the limitations. It’s possible that the new regulation will prevent new users from opening accounts on the website. All users’ Paytm wallets, Paytm Fastags, and Paytm mobility cards will be impacted, according to the RBI’s press release on the subject.
Paytm Payments Bank Limited also replied to the statement early on February 1st, stating that PPBL is acting immediately in accordance with RBI directives and is collaborating with the RBI to promptly resolve their concerns.
Additionally, the company has declared that One97 Communications Limited (OCL) will no longer work with Paytm Payments Bank and will only collaborate with other banks going forward. ” OCL is a payments company that collaborates on a range of payment products with multiple banks, not just Paytm Payments Bank. Since the embargo’s inception, OCL has begun to collaborate with other banks. We will now expedite the plans and switch over entirely to other bank partners. OCL will not be collaborating with Paytm Payments Bank Limited going forward; instead, it will only work with other banks. OCL said in a press release that it will only grow its financial services and payments business in collaboration with other banks.
The Company anticipates that this action will, in the worst case, have an impact on its future annual EBITDA of between Rs. 300 and 500 crores, depending on the nature of the resolution. But according to Paytm, the company plans to keep going in the same direction to increase profitability.
What does this signify to you, though?
Paytm Payments Bank restrictions imposed by RBI
Paytm Payments Bank will stop accepting new users after February 29. This implies that you won’t be able to create a new account on Paytm after the specified date if you aren’t already a user. Current users won’t be able to access their Mobility Cards, Paytm wallets, or Paytm Fastags. Mobility cards are essentially transit cards that can be used to pay for a variety of expenses, including groceries and gas, shopping bills, parking fines, ATM withdrawals, bus and metro rides, and more.
However, according to a statement released by Paytm recently, both its offline services and its existing users’ access to the platform’s payment solutions will persist after February 29. “Online retailers who use the Paytm Payment Gateway will continue to have payment options available to them. Paytm stated in a press release that “OCL’s offline merchant payment network offerings, such as Paytm QR, Paytm Soundbox, and Paytm Card Machine, will continue as usual, where it can onboard new offline merchants as well.”
After February 29, Paytm won’t be able to take any more deposits. Therefore, you have until the last day of February to add any money you want to your Paytm Payments Bank. You won’t be able to make any more deposits into the savings account after that day.
Despite this, OCL claims that the move will not impact its services, such as loans and insurance distribution. According to Paytm, OCL’s other financial services, which include loan distribution, insurance distribution, and equity broking, are unrelated to Paytm Payments Bank Limited and should remain unaffected by this move.
Additionally, the central bank has declared that credit and debit transactions—including those made through wallets—will not be accepted. Customers may, however, withdraw without any limitations in accordance with the announcement. In essence, you won’t be able to send or receive money from your account, but you will still be able to access and withdraw any remaining funds from your Paytm account.
After February 29, 2024, there won’t be any more credit transactions, deposits, or top-ups permitted in any customer accounts, prepaid cards, wallets, FASTags, NCMC cards, etc.; the only exceptions would be interest, cashbacks, or refunds, which could be credited at any time.
Additionally, the Reserve Bank of India has stated that the bank shall cease providing any additional services, including bill payment, UPI facilities, and fund transfers (regardless of the kind of services provided, such as AEPS, IMPS, etc.), after February 29. This implies that after the specified date, you won’t be able to use Paytm services to send money, pay bills, or conduct UPI transactions.
To be clear, the action targets Paytm’s banking operations; however, it makes no indication of whether or not transactions conducted through external banks will also be impacted. That is, if Paytm is linked to an external account, you might be able to use it to make UPI payments. You might still not be able to use Paytm Wallet, though, since it is powered by Paytm Payments Bank. According to Gaurav Goel, Founder-Director of Fynocrat Technologies, the RBI’s action mainly targets Paytm’s banking operations. Customers can continue to use Paytm for digital payments as long as their account is linked to an external bank, even after February 29.
But given that Paytm Payments Banks power UPI as well, this only serves to further complicate matters. Should that not also be impacted after February 29? When Paytm makes an official announcement, this might become more evident. To better comprehend this, we have also gotten in touch with Paytm. As soon as we have an update from them, we will update this area.
Additionally, the RBI mandates that One97 Communications Ltd. and Paytm Payments Services Ltd. terminate all nodal accounts as soon as possible. This basically means that the Payments Bank services and Paytm’s parent company won’t be able to conduct any transactions from their own nodal accounts either. Nodal Accounts were mandated by the Reserve Bank of India (RBI) for intermediaries such as payment gateways, aggregators, and e-commerce platforms. The goal is to guarantee that vendor payments are released to them as soon as possible and without causing needless delays.
The RBI’s audit report, which made public the restriction on Paytm Payments Bank, stated that the action was taken in response to the bank’s ongoing material supervisory concerns and persistent non-compliances, which called for additional supervisory action. To put it briefly, Paytm Payments Bank, also known as PPBL, is a digital banking service that offers savings account options in addition to banking services. It was created in 2017 and is a Paytm extension. With approval from the Reserve Bank of India (RBI) to function as a payments bank, PPBL commenced operations in November 2017.