“Serious supervisory concerns” have been raised about RBI Bans Paytm Payments Bank. The lender has been ordered to thoroughly examine its information technology system and suspend onboarding new clients immediately. In a decision published today, the Reserve Bank of India said that the Paytm Payments bank would be prohibited from attracting new clients. It will only be permitted to add new clients when the RBI has reviewed its audit report and found it adequate.
RBI Bans Paytm Payments Bank
Paytm Payments Bank was ordered to halt onboarding new clients with immediate effect by the Reserve Bank of India, which was acting under its authority under Section 35A of the Banking Regulation Act, 1949, according to a press release. According to the RBI, the bank has also been ordered to hire an information technology audit company to perform a complete System Audit of its information technology system.
The central bank said this action had been taken due to some severe supervisory issues identified within the bank. In 2017, the Reserve Bank of India (RBI) granted clearance to Paytm Payments Bank, granting it a license.
In addition, the Reserve Bank of India has asked the bank to hire an independent auditor to conduct a complete assessment of its information technology system.
Paytm Payments Bank Ltd may be sued under Section 35 A of the Banking Regulation Act, 1949, according to a press release. With immediate effect, the Reserve Bank of India (RBI) has instructed Paytm Payments Bank Ltd to cease accepting new clients by its powers, including those granted under Section 35A of the Banking Regulation Act, 1949.”
“The bank has also been ordered to hire an information technology audit company to undertake a full System Audit of its information technology system. As soon as the Reserve Bank of India has reviewed the report from the IT auditors, it will give specific approval for Paytm Payments Bank Ltd. to onboard new clients. A press release said several supervisory issues had been detected in the bank.
Is Paytm Payments Bank Going to Be Discontinued?
The company’s Paytm Payments Bank, which has an enormous scale among all payment banks, generated a net profit of Rs 17.88 crore on Rs 1,987.84 crore for the fiscal year ending March 31, 2021, according to Paytm’s IPO prospectus. One97 Communications holds a 49 percent stock stake in Paytm Payments Bank, with the remaining 51 percent held by Vijay Shekhar Sharma, according to public filings.
A Noida-based branch of Paytm Payments Bank officially launched its operations in May 2017 in August 2016. HDFC Bank was forbidden from introducing any new digital goods or services and issuing any new credit cards by the Reserve Bank of India (RBI) until the institution rectified recurrent technical concerns.
The Paytm Payments Bank
In 2015, Paytm Payments Bank (PPBL) was created in Noida, India, and is the country’s largest payments institution. As of 2015, the company is licensed as a payments bank by the Reserve Bank of India. It was first made available in November 2017.
As of August 2020, Vijay Shekhar Sharma owns 51 percent of the business, with One97 Communications Limited owning 39 percent and a joint venture between Vijay Shekhar Sharma and One97 Communications owning the remaining ten percent of the firm’s stock. There are more than 64 million customers of the company as of April 2021.
The Reserve Bank of India
India’s central bank and the regulatory agency is the Reserve Bank of India (RBI). Indian Reserve Bank issues and distributes the rupee and supervises and regulates the country’s financial sector. Additionally, it oversees the primary payment networks in the country and helps the country increase its economic growth. This department of the Reserve Bank of India (RBI) mints Indian banknotes and coins, one of its specialized departments.
To oversee India’s payment and settlement systems, the Reserve Bank of India created a specialized division called the National Payments Corporation of India. To provide deposit insurance and credit guarantee services to all Indian banks, the Reserve Bank of India formed a specialized division designated as the Deposit Insurance and Credit Guarantee Corporation.
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