RBI cancels banking licence of Paytm Payments Bank

The Reserve Bank of India has cancelled the banking licence of Paytm Payments Bank with immediate effect under the Banking Regulation Act, 1949, stopping it from conducting any form of banking activity. The regulator said the decision was taken after finding serious compliance issues and concerns over how the bank’s affairs were being managed, adding that the operations were not in the interest of depositors or public trust in the banking system. As a result, Paytm Payments Bank will no longer be allowed to accept deposits, offer banking services, or carry out regulated banking activities, while the RBI has also confirmed that it will approach the High Court to initiate the winding-up process.

Why RBI took this decision

The RBI stated that the bank repeatedly failed to comply with licensing conditions and regulatory requirements under the Banking Regulation Act. Authorities highlighted issues related to governance and management practices, saying the overall functioning of the bank posed risks to depositors and did not meet required banking standards.

Impact on customers and operations

Despite the cancellation, the RBI clarified that the bank has sufficient liquidity to repay all deposit liabilities during the winding-up process, ensuring customer funds are not immediately at risk. However, services such as deposits, onboarding of new customers, and wallet top-ups had already been restricted earlier, and this decision fully halts banking operations going forward.

Background and regulatory buildup

This action follows a series of earlier restrictions placed on Paytm Payments Bank over time, including limits on onboarding new users and restricting account credits and transactions. The latest move is considered the culmination of a prolonged regulatory review that intensified over concerns regarding compliance and operational practices.