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This decision comes amidst the ongoing crisis surrounding the bank, which has raised concerns among its customers and regulatory authorities.
“No further deposits or credit transactions or top ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards, etc. after March 15, 2024 (extended from the earlier stipulated timeline of February 29, 2024), other than any interest, cashbacks, sweep in from partner banks or refunds which may be credited anytime,” RBI said.
The central bank, on January 31, directed it to stop accepting deposits or top-ups in any customer accounts, wallets, FASTags and other instruments after February 29, 2024. RBI had said that a Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliances and continued material supervisory concerns in Paytm Payments Bank Ltd. Based on that, the central bank imposed various restriction on the bank.
The RBI also issued a set of FAQs relating to the Paytm crisis on Friday i.e. February 16, 2024.
Also Read: Paytm Payments Bank crisis: RBI releases Paytm FAQs, details here RBI’s take on Paytm crisis
RBI Governor Shaktikanta Das said on Thursday that all its actions, including certain restrictions it imposed on Paytm’s associate bank, are in the best interest of the public.
“All our actions being a responsible regulator and supervisor are in the best interest of systemic stability and protection of depositors or customers’ interest. These aspects cannot be compromised. Individual entities should be mindful of such aspects for their long term success,” RBI Governor said at the post monetary policy press conference, responding to series of questions from reporters.
His remarks were in general and not just specific to Paytm. Das also explained how RBI as a regulator, if need arises, engages with a regulated entity.
“We give sufficient time to every regulated entity that is supervised by the RBI to comply with the regulatory requirements, and sometimes it may even look more than sufficient time. We are a responsible regulator, we are a responsible supervisor. If everything had been complied, I am talking in a general sense, why should we act. Afterall, we have a responsibility, its a responsible institution,” Das said.
“We are completely focussed on nudging the regulated entity to take corrective actions…And sufficient time is given for undertaking such corrective action. When such constructive engagement which we undertake, when that does not work or when the regulated entity does not effective action , we go for imposing supervisory or business restrictions.”
Das reiterated that the action on Paytm company should only be seen as an action for the greater interest of customers.
“Such restrictions which we impose are always proportionate to the gravity of the situation,” he added.
Das said the RBI received queries and clarifications and it will issue a list of FAQs sometime next week on this issue.
On the overall fintech space, Das said RBI will always keep encouraging and supporting financial system and there should be no doubts on the contrary.
Deputy Governor Swaminathan, commenting on the Paytm matter, said, “As a matter of policy we don’t comment on individual entities but as the question is from most of you we will respond.”
“First, this is a supervisory action on a regulated entity for a persistent non-compliance. Second, such supervisory actions are invariably preceded by months at time and at times years of bilateral engagement, where we not only point out deficiencies, but provide more than adequate time for them to take corrective actions,” ANI quoted him as saying.
“Third, as a regulator, its incumbent upon us protect the interest of the ultimate consumer and thereby protecting the stability of the financial system. These actions have to be seen in that particular context,” Swaminathan added.
On asked what lies ahead, the deputy governor said, “You will have to wait. Feedback we have been getting, and we will work on, and as a responsible regulator, suitable steps will be taken to ensure that customer inconvenience if any is minimised.”
ED heat on Paytm
The Enforcement Directorate on Thursday questioned senior Paytm executives and taken submission of documents from them following the recent RBI action of barring Paytm Payments Bank Ltd from accepting deposits or top-ups in any customer account, PTI had reported, citing official sources. The central agency, according to the sources, is conducting preliminary examination of documents before it decides to launch a formal investigation into the RBI-flagged alleged irregularities at the fintech company under the Foreign Exchange Management Act (FEMA).
Some documents have been recently submitted by Paytm executives following which they were asked certain questions. Some more information has been sought, the sources said.
As of now, no irregularities have been detected and a case under FEMA will only be registered once any contravention under the said law is found, they added.
An investigation under the Prevention of Money Laundering Act (PMLA) involving Paytm is already going on for some time, they said.
One97 Communications, which provides financial services under the Paytm brand, and its banking arm Paytm Payments Bank have been receiving notices and requests for information with respect to customers of the respective entities, an exchange filing by the company said on Wednesday.
Paytm said its associate Paytm Payments Bank Limited does not undertake outward foreign remittances.
“One 97 Communications Limited (OCL), its subsidiaries and its associate, Paytm Payments Bank Limited, have over time been receiving notices and requisition for information, documents and explanations from the authorities, including Enforcement Directorate (ED), with respect to the customers that may have done business with the respective entities, and provided the required information, documents and explanations to the authorities,” Paytm said in a regulatory filing.
Paytm said the company and its associate have continued to provide information, documents and explanations to the authorities as required by them.
Earlier this month, the Enforcement Directorate and the Financial Intelligence Unit asked the RBI to share its report on the recent action taken to bar Paytm Payments Bank Ltd from accepting deposits or top-ups in customer accounts, according to sources.
The ED has been probing Paytm and other online payment wallets as part of its money laundering investigation against Chinese-controlled mobile phone apps who allegedly laundered funds using merchant IDs created on these fintech platforms.
The Financial Intelligence Unit (FIU) has also sought the report from the RBI to analyse whether Paytm or PPBL followed the required procedures as a “reporting entity” under section 13 of the PMLA.
Under this section of the anti-money laundering law, a financial institution, bank or intermediary has to furnish details to the FIU about maintaining records of all transactions and documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients.
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