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Paytm Payments Bank banned from onboarding new customers

Paytm’s Vijay Shekhar Sharma has been open about wanting to convert Paytm into a small finance bank.

Published:Fri, March 11, 2022 7:50pm

By Danny Dcruze

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Paytm Payments Bank Ltd has been asked to stop onboarding new customers with immediate effect. The Reserve Bank of India (RBI) has made this announcement under section 35A of Banking Regulation Act, 1949.

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A statement released by RBI, said, "Reserve Bank of India has today, in exercise of its powers, inter alia, under section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank Ltd to stop, with immediate effect, onboarding of new customers."

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RBI has asked Paytm Payments to hire an audit firm in order to take a look at the Bank's IT system. The RBI statement said, " The bank has also been directed to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system. Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing report of the IT auditors."

RBI hasn't specified the inconsistencies found in the bank's IT system. However, the central bank claimed that the action is based on certain material supervisory concerns observed in the bank.

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Paytm's Vijay Shekhar Sharma has been open about wanting to convert Paytm into a small finance bank. He has claimed that moving in that direction will solve a lot of problems for the entity. This plan surfaced before Paytm filed an IPO last year. In order to get the Small Finance Bank status, payment banks need to show a clean record of at least five years.

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