India’s banking regulator ordered Paytm Payments Bank to stop conducting business.
The RBI had in 2022 ordered the bank to stop accepting new customers pending an audit. In a statement Wednesday, the regulator said the audit “revealed persistent noncompliances and continued material supervisory concerns in the bank, warranting further supervisory action.”
The ruling means that the bank must cease banking activities after Feb. 29. That means Paytm Payments Bank cannot take deposits, allow credit transactions, or permit top-ups on customer accounts, wallets, cards or prepaid instruments after that date.
The exact nature of the “noncompliances” and “supervisory concerns” at the bank were not immediately clear. PYMNTS has contacted the RBI and Paytm for comment but has not received replies.
In October, the RBI fined Paytm Payments Bank for noncompliance, including know your customer regulations, saying the bank failed to identify the beneficial owners of entities using its payout services and failed to monitor payout transactions and carry out risk profiling of these entities.
The regulator also said the bank violated the regulatory ceiling of end-of-the-day balance in certain customer advance accounts that were using payout services and that Paytm Payments Bank had delayed reporting a cybersecurity incident, raising questions about the bank’s ability to properly handle security threats.
The news comes as Paytm and other Indian FinTechs struggle to contend with recent RBI measures dealing with smaller, unsecured loans.
The regulator, which is also India’s central bank, last year mandated that lenders had to change their capital requirements to prevent outsized consumer debt and delinquencies after seeing a jump in late payments.
RBI Governor Shaktikanta Das warned banks to avoid “all forms of exuberance” after announcing the measures.
Paytm announced in November that it would make fewer small loans — those under 50,000 rupees (about $600) — in response to the RBI’s rule changes. The company said it wanted to expand its loan distribution business by targeting higher-ticket loans to consumers and merchants.