Paytm, a term used in many Indian households these days has suffered a major setback in its not very old Paytm Payments App (PPA). The One97 communications owned 10 billion dollar company had recently launched its Payments Bank in the presence of the Indian Finance Minister Arun Jaitley but as a separate entity.
What happened?
With a similar ban placed on Airtel payments Bank in July, the Reserve Bank of India (RBI) seems to be on a lookout for wrongdoings by these new initiatives. Hence, after the company procured a license from the (RBI) in August 2015 and started to run its operations eight months ago, it doesn’t come as a surprise that the RBI has recently barred it from onboarding new customers. The current PPB website displays the new RBI order regarding registration of new customers, highlighting its precarious position.
Why did it Happen?
A recent response statement released by the RBI towards an RTI send by TOI enlists the following four reasons –
1) Violation of Know-Your-Customer (KYC) rules during the registration of new customers.
2) Close relations between Share stakeholder Vijay Shekhar Sharma and PPB heads even after it is required that these independent payment institutions maintain a certain distance from promoter entities.
3) The rule of deposits only less than 1 lakh in an account was also not adhered to.
4) Lastly, the bank failed to maintain the 100 crores net worth limit.
These violations of enlisted rules seemed to have enraged the RBI officials to take their decision. The RBI response sheet also mentioned how the total deposit of PPB was far behind that of its competitor Airtel payments bank.
This step not only hinders the struggling company’s progress but also enforces it to be on its toes, hoping to dodge a possible monetary fine.
