RBI Fines Paytm Payments Bank for KYC Violations

India’s central bank, the Reserve Bank of India (RBI), has fined Paytm Payments Bank for non-compliance, including Know Your Customer (KYC) regulations, according to an Oct. 12 (Thursday) statement.

The 53.9 million rupees ($647,762.58) penalty comes as a result of Paytm Payments Bank’s failure to identify the beneficial owners of entities using its payout services, as well as its failure to monitor payout transactions and carry out risk profiling of these entities.

This is not the first time that Paytm Payments Bank has faced regulatory action. Last year, the RBI barred the bank from onboarding new customers and ordered a comprehensive audit of its IT systems due to “material” supervisory concerns, per a report by Reuters.. The central bank’s recent penalty is an extension of these concerns and highlights the continued non-compliance by Paytm Payments Bank.

In addition to the non-compliance issues, the RBI also noted that Paytm Payments Bank had breached the regulatory ceiling of end-of-the-day balance in certain customer advance accounts that were availing payout services. This indicates a failure on the part of the bank to adhere to the regulatory guidelines set by the RBI.

Furthermore, the RBI highlighted that Paytm Payments Bank had delayed reporting a cyber security incident, which raises concerns about the bank’s ability to effectively handle and respond to security threats.

Paytm Payments Bank is a prominent player in India’s digital payment sector, competing with other major players such as Google Pay and Walmart’s PhonePe.

As fraud incidents climb along with digital innovations, Form3 CEO Michael Mueller recently told PYMNTS CEO Karen Webster that it’s more critical than ever before for businesses to know their customers and put KYC safeguards in place.

Paytm Payments Bank will now need to address the issues raised by the RBI and take appropriate measures to ensure compliance with regulatory requirements. This includes strengthening its KYC processes, enhancing monitoring of payout transactions, conducting risk profiling of entities availing payout services, and improving its cybersecurity incident reporting mechanisms.