RBI tells Paytm bank not to open new a/cs
Premium- Regulator seeks comprehensive audit of payments bank’s IT system
MUMBAI : The Reserve Bank of India has barred Paytm Payments Bank, founded by Vijay Shekhar Sharma, from onboarding new customers until a comprehensive audit of its information technology system is done, in a setback for parent One 97 Communications Ltd.
“This action is based on certain material supervisory concerns observed in the bank," RBI said, without providing details.
Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by the central bank after reviewing the report of the information technology auditors, it said.
This is not the first time Paytm Payments Bank has fallen afoul of the banking regulator.
In August 2018, the Reserve Bank took similar action against the bank after an audit report found that the company violated know-your-customer (KYC) norms.
In fact, parent One97 Communications’ share sale documents ahead of its initial public offering in November noted 13 instances where the bank violated rules, based on the central bank’s inspection report for the March 2020 financials.
The violations included lack of internal audit, inadequate measures relating to know-your-customer processes and delay in reporting of certain fraud cases.
In October, RBI imposed a ₹1 crore penalty on the bank in relation to the Bharat Bill Payment Operating Unit.
MINT PREMIUM See All
While One97 Communications claimed that it concluded the transfer in August 2017, the complete transfer of services was only done in March last year. The latest order from the central bank is likely to add to the parent’s problems.
Shares of One97 Communications, the parent of Paytm, slumped almost 64% from its IPO price of ₹2,150.The company raised ₹18,300 crore in its initial share sale.
On Friday, the stock fell 0.14% to ₹774.80 on BSE, underperforming the benchmark Sensex index’s 0.15% gain. The RBI announcement came after market hours.
Paytm Payments Bank is 51% owned by Sharma, while One97 Communications holds the rest.
Paytm Payments Bank started operations in 2017 to help Paytm customers without access to the formal banking sector open bank accounts after getting its licence in 2015. In December, it received RBI’s approval to function as a scheduled payments bank.
Never miss a story! Stay connected and informed with Mint. Download our App Now!!