RBI to ban Paytm Payment Bank Deposits from Feb 29th

RBI to ban Paytm Payment Bank Deposits from Feb 29th

The central Bank of India, Reserve Bank of India (RBI) has restricted Paytm Payments Bank from accepting deposits/top-ups in any customer account, wallets, and FASTags after February 29. Due to non-compliances and continued material supervisory concerns in the bank, under Section 35A of the Banking Regulation Act, 1949, the bank has taken this decision.

Additionally, the RBI has also banned Paytm Payments Bank from onboarding new users from February 29, 2024. Since this announcement, Paytm stocks nosedived 20 per cent and hit the lower circuit limit on February 1. This ban on Paytm Payments Bank will affect users who are currently using Paytm-linked services like wallets, FASTags, NCMC (National Common Mobility Card) cards, and more.

Expressing his solidarity GOQii founder Vishal Gondal, written on his social media handle X, "Dear @vijayshekhar, we are all in shock watching what has unfolded today. All I can say on behalf of everyone is that the Indian Startup community is strongly behind you."

Another Fintech Startup owner Keval Bhanushali, CEO of 1 Finance said, "The basic difference between India & US will be the shallow mindset of seeking pleasure in an entrepreneur’s downfall. We have seen it in airlines and we are starting to see it in Fintech".

According to the statement of RBI, “The Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action.”

RBI further stated that, withdrawal or utilisation of balances by its customers from their accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards are to be permitted without any restrictions, up to their available balance.

RBI said that the customers continue to use the service even after February 29, but they won’t be able to credit an additional amount to your Paytm Wallet. On the other hand hand, if you want to transfer your money to other bank account, this will attract a transaction fee of 3 per cent while sending money to other bank accounts.

However, Paytm said in their official statement that, it will soon move services like Paytm Wallet, FASTags, and NCMC accounts to other banks. This sudden announcement of RBI has caused significant damage to the company's market valuation.