Explained: RBI ban on Paytm Payments Bank
The country’s central bank Reserve Bank of India has barred fintech major Paytm from offering all forms of banking services to its customers. The RBI said that the action against One 97 Communications, which runs Paytm, was due to "non-compliance and continued material supervisory concerns in the bank."
The new restriction applied by RBI may lead to several services offered by the platform becoming inoperable. Here are the services that will work and those that will not.
What will work: FASTags
FASTags issued by Paytm Payment Banks will continue working and users can continue using existing balances in their FASTag wallet and via third-party banks after the nodal transfer happens.
What will work: UPI on Paytm app
Paytm users can continue to use the Paytm app and Paytm UPI without any restriction.
What will work: Offline merchant network
Services like Paytm QR, Paytm Soundbox, and Paytm Card Machine for offline merchants will continue as usual, allowing onboarding of new offline merchants.
What will work: User deposits safety
User deposits in savings accounts, Wallets, FASTags, and National Common Mobility Card (NCMC) accounts are not impacted. Customers can continue using existing balances.
What will work: Online merchant services
The Payment Gateway business for online merchants will continue to offer payment solutions to existing merchants.
What will not work: Partnership with PPBL
The company will no longer work with Paytm Payments Bank Limited (PPBL) and will accelerate plans to move to partnerships with other banks.
What will not work: Onboarding of new customers
Paytm Payments Bank Limited (PPBL) will not be able to onboard new customers or open new accounts.
What will not work: Paytm app/wallet linked to Paytm Payments Banks
Paytmapp/wallet linked to Paytm Payments Banks will stop working after February 29. The beneficiary can continue to receive the credits up to February 29, 2024. Thereafter, the beneficiary can only withdraw or transfer funds from his wallet or account. No credits or top ups into Paytm Payments Bank account or wallet are allowed from March 1, 2024.
What will work: Financial Services (Loan, Insurance, Equity Broking)
Other financial services such as loan distribution, insurance distribution and equity broking are not directly related to the associate bank and are expected to be unaffected.
What will not work: PPBL Nodal Account termination
The directive to terminate the nodal account of OCL and PPSL by February 29, 2024, will lead to the migration of the nodal account to other banks during this period.
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