Delhi, April 25: The Reserve Bank of India (RBI) on Friday cancelled the banking licence of Paytm Payments Bank Limited (PPBL) with immediate effect and said it will approach the High Court to wind up the bank. This is the first regulatory action taken against a payments bank.
The central bank said the licence was cancelled under Section 22(4) of the Banking Regulation Act, 1949, citing administrative concerns and violation of licence conditions, after finding that the bank’s business was being conducted in a manner detrimental to the interests of the bank and its depositors.
With effect from the close of business on April 24, PPBL is prohibited from carrying on banking business or any additional business permitted under the Banking Regulation Act.
The RBI said Paytm Payments Bank has sufficient liquidity to repay its entire deposit liabilities after its closure. This is an attempt to reassure customers amid the austerity measures.
Paytm, which laid off 3,500 employees as part of a restructuring, cited multiple reasons for the cancellation, including non-compliance with provisions relating to the interests of depositors and public interest, as well as failure to meet the conditions attached to its payments bank licence.
The move follows a series of regulatory restrictions imposed on the bank over the past few years. The RBI had directed PPBL to stop accepting new customers from March 11, 2022. Subsequently, in January and February 2024, the regulator imposed transaction restrictions barring further deposits, credits and top-ups in existing customer accounts, wallets and prepaid devices.