Paytm and its banking arm Paytm Payments Bank Ltd (PPBL) had questionable dealings of hundreds of crores of rupees, prompting RBI to crack down on the company. Following this the shares of One97 Communications Ltd, which owns Paytm brand, plunged 40 per cent in the first two days of February.
The apex bank has ordered PPBL to stop accepting further deposits or top-ups on customer accounts, wallets, FASTags and prepaid instruments as well as conducting further credit transactions after February 29.
However, customers can access their existing deposits and pay for services with money stored in their wallets till February 29.
What led to RBI curbs on Paytm Bank?
There were lakhs of accounts that flouted KYC (Know Your Customer) norms and in thousands of instances, single PANs were used for opening multiple accounts, PTI quoted sources as saying.
Another major concern was potential money laundering as there were cases where the total value of transactions ran into crores of rupees. This is beyond regulatory limits in minimum KYC pre-paid instruments.
An "unusually" high number of dormant e-wallet accounts were reportedly found in the bank.
The RBI has sent its findings to the Enforcement Directorate, the Ministry of Home Affairs and the Prime Minister's Office.
A Paytm spokesperson said, "One 97 Communications Ltd. and Paytm Payments Bank have never been probed by the Enforcement Directorate. Some merchants using our platforms have been the subject of investigations and we answer authorities on this same as and when asked. We strongly refute money laundering allegations and caution you against speculation."
The ED is expected to investigate the money laundering angle or any other illegal activity.
RBI's first warning came in 2021
The RBI had in 2021 reportedly directed PPBL to address anti-money laundering violations. However, norms continued to be flouted with the compliances submitted by the bank often found to be incomplete or false, according to sources.
In March 2022, the central bank imposed supervisory restriction on PPBL to stop on-boarding new customers. It also directed to bank to appoint an external firm to conduct a comprehensive audit.