The Paytm Payments Bank Puzzle
The Paytm Payments Bank Limited (PPBL) had hit a setback with restrictions issued by the RBI on January 31, 2024 on the basis of persistent non-compliance and material supervisory issues in the PPBL. On this matter, after the RBI exercised its powers against the PPBL under Section 35A of the Banking Regulation Act, 1949, the apex bank has now issued an extension of time, from February 29 to March 15, 2024 for the customers of the PPBL. Earlier, in March 2022, the RBI had issued a prohibition to the PPBL on inducting new customers.
What the RBI says:
In the latest press release, the RBI says that, “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.” The press release by the RBI also directs the public and PPBL customers as to what to do and what not to do.
After the said date of March 15, 2024, no customer would be able to deposit or top-up in any customer accounts, prepaid instruments, wallets, FASTags, or National Common Mobility Cards. The PPBL customers, though no deposits are allowed, would be able to utilise or withdraw the available balance money from their accounts which would include savings bank accounts, current accounts, prepaid instruments, FASTags and National Common Mobility Cards, etc.
Except for the accounts which are frozen, the other account holders can withdraw their available balance, and the account holders who have deposits parked with partner banks can also withdraw their available balance. Only refunds, cashbacks, sweep-ins from partner banks or interests will be allowed to be credited or deposited to accounts even after March 15, 2024. Salaries would not be allowed to be credited into any PPBL accounts. The account holders whose salaries get credited to PPBL, will have to use another bank account for the purpose, the RBI press release said.
As in the case of salaries, subsidies or any direct benefit transfers which are linked to Aadhar from the Government, will not be allowed to be deposited into customer’s account with Paytm Payments Bank after March 15, 2024. Though deposits will not be allowed, withdrawal mandates, such as in the case OTT subscription through automatic UPI and EMI will be allowed, if balance money is available in the account; though the RBI clearly recommends to shift to another bank account.
Users of Paytm Wallet will not be allowed to top up, transfer money or deposit any amount of money into it but cash backs or refunds are allowed. As for FASTag users, top-ups and recharge are not allowed. The available options are, that the user could continue until the balance in PPBL runs out or close the FASTag issued by PPBL, ask for a refund and go for a new FASTag from another bank.
For traders using Paytm QR code, Paytm soundbox or Paytm POS terminal, which is linked to other bank accounts, they can continue to use this even after the deadline of March 15, 2024. For traders using the same which is linked to an account with PPBL, would have to get a new QR code linked to an account of another bank to receive payment deposits as no deposits will be allowed to any PPBL wallet or account after March 15, 2024.
The users of National Common Mobility Card (NCMC) issued by the PPBL, are not allowed any recharging, but can use it until their balance runs out. In this case, the transfer of any balance is not available, though refund is. The procurement of an NCMC from another bank is recommended by the RBI. For people using Bharat Bill Payment System (BBPS) and Aadhar Enabled Payment System (AePS), they can continue up to the available balance only, the RBI said.
Paytm Payments Bank and Paytm App:
The Paytm Payments Bank, which was founded in the year 2017, is an Indian payments bank with headquarters in Noida. The bank offers products like savings account, salary account, current account, debit and ATM card, payments, wallet, food wallet, National Automated Clearing House (NACH) and FASTags while the Paytm app is a digital platform. The Payments banks concept, introduced in India by the RBI with the objective of financial inclusion, are different from the traditional banks as they cannot give or issue loans or credits, but can issue an ATM and debit card, and mobile and online banking. They are licensed and comes under the regulations of the RBI.
The Paytm app or the Paytm digital platform is a part of the Paytm ecosystem which, unlike the payments bank, is a payments app, used to pay bills, recharges, buy tickets and send money. The Paytm payments app, which is linked to bank accounts other than that of Paytm Payments Bank does not come under the RBI screening.
As the matters are heading towards the deadline, with the stock market showing decline and a rebound of the Paytm shares, the Paytm website says that their “Paytm app is working and will keep working beyond March 15th, 2024.” The Paytm Payments Bank is said to be in talks with third party banks, so as to “distribute payments and financial services products” as part of the solution.
