RBI revokes Paytm Payments Bank's banking licence, will move High Court for winding up

The Reserve Bank of India cancelled the banking licence of Paytm Payments Bank Limited, on Friday, ceasing its operations as a bank, effective from April 24. "The Reserve Bank of India (RBI) has cancelled the banking licence issued to Paytm Payments Bank Limited under Section 22(4) of the Banking Regulation Act, 1949 (‘BR Act’) effective from close of business on April 24, 2026," RBI said in its order.This means the bank can no longer carry out any ‘banking’ activities as defined under the law, nor any other related business, with immediate effect. "Consequently, Paytm Payments Bank Limited is prohibited from conducting the business of 'banking' as defined in Section 5(b) or any additional business specified under Section 6 of the Banking Regulation Act, 1949 with immediate effect."The central bank will now approach the High Court to begin the process of winding up the bank. It added that the bank currently has enough liquidity to repay all its depositors once the winding-up process starts. "Paytm Payments Bank Limited has enough liquidity to repay its entire deposit liability upon winding up of the bank."Here's why RBI revoked the licence:(i) RBI stated, in its order, the bank’s operations were carried out in a way that harmed its own interests as well as those of its depositors, leading to non-compliance with Section 22 (3) (b) of the BR Act. (ii) The overall conduct of the bank’s management was found to be against the interests of depositors and the public, resulting in a breach of Section 22 (3) (c) of the BR Act. (iii) Allowing the bank to continue operations would not serve any useful purpose or public interest, as outlined under Section 22 (3) (e) of the BR Act. (iv) The bank did not meet the conditions set under its Payments Bank licence, thereby violating Section 22 (3) (g) of the BR Act.This move follows earlier restrictions on the bank when it was ordered to stop adding new customers from March 11, 2022. Later, on January 31, 2024 and February 16, 2024, the RBI barred any new deposits, credits or top-ups in customer accounts, prepaid instruments and wallets.