The Reserve Bank of India (RBI) on Friday cancelled the banking licence of Paytm Payments Bank Ltd (PPBL) with immediate effect and said it will move the High Court for winding up of the bank, marking an unprecedented regulatory action against a payments bank.
The central bank said the licence was cancelled under Section 22(4) of the Banking Regulation Act, 1949, after finding that the affairs of the bank were conducted in a manner detrimental to the interests of the bank and its depositors, while also citing governance concerns and violations of licensing conditions.
With the cancellation effective from the close of business on April 24, PPBL has been prohibited from conducting banking business or any additional business permitted under the Banking Regulation Act.
RBI said Paytm Payments Bank has sufficient liquidity to repay its entire deposit liabilities upon winding up, seeking to reassure customers amid the drastic action.
The regulator listed multiple grounds for the cancellation, including non-compliance with provisions related to depositor interests and public interest, as well as failure to meet conditions attached to its payments bank licence.
Friday’s action follows a series of regulatory curbs imposed on the bank over the past few years. RBI had directed PPBL to stop onboarding new customers from March 11, 2022. Subsequently, in January and February 2024, the regulator imposed business restrictions that barred further deposits, credits and top-ups in existing customer accounts, wallets and prepaid instruments.