It had been reported that RBI had banned Paytm’s payments bank from opening new accounts and e-wallets in August. Want to know why? We have the answer.
RBI for the first time has disclosed the reasons behind the move. The four reasons! The apex financial authority of India said that the Noida-based company was in violation of know-your-customer (KYC) rules while on-boarding users. These precise violations are not clear.
Secondly, it has also been stated that the RBI was also not contended with the close relations between Paytm founder Vijay Shekhar Sharma’s One97 Communications and the entity that runs Paytm Payments Bank (PPB).
The bank is owned 51% by Paytm owner, while the rest is owned by One97 Communications and its subsidiaries. The apex bank stated that payments banks are expected to maintain an arm’s length relationship with promoter group entities.
Along with this, the RBI added that the payments bank failed to maintain the prescribed net worth limit of Rs 100 crore. It mentioned that the bank also violated the end-of-the-day Rs 1 lakh limit per account. It has been a rule that payments banks are not allowed to hold more than Rs 1 lakh in each account.
Following the RBI ban on opening new accounts and e-wallets, the bank’s then CEO Renu Satti resigned. Furthermore, the bank announced the appointment of S K Gupta, a former NPCI and SBI executive, as CEO.
Payments banks have remained largely unsuccessful in the country due to various security issues. Despite all the fervour they initially created, their total deposits were just under Rs 540 crore as of May 2018.
Out of the four payments banks in the country, Airtel Payments Bank had deposits of Rs 307 crore, Paytm Payments Bank had Rs 194 crore, Fino Payments Bank had Rs 37 crore, and India Post Payments Bank had Rs 1.4 crore.