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RBI bans Paytm Payments Bank: 5 Things you need to about the fiasco

RBI's recent order for the Paytm Payments Bank has created a lot of confusion among users. So, here's a detailed guide that will answer all your questions.

Edited By: Shweta Ganjoo

Published: Feb 02, 2024, 07:24 PM IST

Paytm
Paytm

Story Highlights

  • Paytm Payments Bank has been prohibited from onboarding new customers.
  • Customers will be able withdraw money from their accounts until their balance exhausts.
  • Paytm app will continue to work post February 29.

RBI recently directed Paytm Payments Bank from onboarding new customers. In addition to that, RBI’s circular put a hold on credit transactions or deposits in the Paytm Payments Bank among other things. The directive raised concerns among Paytm users who feared that the apps will stop working from February 29, 2024. Responding to the directive (and confusion among users), Paytm founder Vijay Shekhar Sharma said that users have nothing to worry about and that the Paytm app and payment kiosks will continue to work after February 29. “Your favourite app is working, will keep working beyond 29 February as usual,” he wrote in a post on X (formerly Twitter).

As the confusion continues, we have created a comprehensive guide decoding the entire matter. So, if you aren’t sure what exactly the RBI directive says or how this development affects you, here’s a simple guide that will help you. Read on!

What is RBI saying?

Reserve Bank of India’s circular dated January 31 has several components. Here’s what they are:

Paytm Payments Bank has been prohibited from onboarding new customers.

— In addition to that, the central bank has prohibited deposits or credit transactions or top ups in any customer accounts, prepaid instruments, wallets, FASTags, and NCMC cards after February 29, 2024. However, RBI has allowed credit transactions based on cashbacks and refunds.

— Withdrawal or use of balances by customers from their accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, and National Common Mobility Cards, have been permitted without any restriction until the available balance gets exhausted.

— Paytm Payments Bank cannot provide any banking service apart from withdrawals post February 29.

— Nodal accounts of One97 Communications Ltd and Paytm Payments Services will be terminated by February 29.

For the unversed, Nodal Account is a type of bank account that is opened by businesses (intermediaries) and is used to hold the funds on behalf of its customers and vendors.

— Paytm Payments Bank needs to complete all transactions pertaining to nodal accounts by March 31.

What does RBI’s directive mean for users?

To put it simply, customers will be able to withdraw their money but not add balance to their accounts. They will continue to get cashbacks, interests and refunds in their Paytm accounts, which they can use for making transactions until the balance gets exhausted.

What is Paytm founder saying?

Paytm founder Vijay Shekhar Sharma in a post on X said that the Paytm app will continue to work post February 29.

“Your favourite app is working, will keep working beyond 29 February as usual…For every challenge, there is a solution and we are sincerely committed to serve our nation in full compliance,” he wrote in his post.

What is Paytm Payments Bank doing?

Paytm’s parent company, One 97 Communications Limited, said that the Paytm Payments Bank is working to address RBI’s concerns. It also said that going forward, it will accelerate its plans to completely move to other bank partners but not with Paytm Payments Bank. The company has also announced a bunch of consumer facing changes. Here’s what they are:

— Paytm Payment Gateway business will continue to offer payment services to its existing merchants.

— Its offline merchant payment network services such as Paytm QR, Paytm Soundbox, Paytm Card Machine, will continue as usual. It will also be able to onboard new offline merchants.

— One 97 Communications Limited and Paytm Payments Bank will move the nodal to other banks by February 29.

— Paytm’s loan distribution, insurance distribution and equity broking services are not related to Paytm Payments Bank Limited and will remain unaffected by RBI’s orders.

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Author Name | Shweta Ganjoo

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