RBI Ban On Paytm Payment Bank: What It Means For Your Wallet, FASTag, And UPI Transactions?

In a major action against Paytm Payments Bank (PPBL), the Reserve Bank on Wednesday directed the lender to stop accepting deposits or top-ups in any customer accounts, wallets, FASTags and other instruments after February 29.

However, any interest, cashback, or refunds may be credited back to customers any time. "No other banking services other than those...like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc), BBPOU and UPI facility should be provided by the bank after February 29, 2024," the RBI added.

The central bank said that the direction follows persistent non-compliance and continued material supervisory concerns. It has to be noted that the RBI had barred PPBL from onboarding new customers with immediate effect on March 11, 2022.

"No further deposits or credit transactions or top-ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime," the RBI stated.

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

"No other banking services other than those ... like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc), BBPOU and UPI facility should be provided by the bank after February 29, 2024," it added.

RBI also said the 'nodal accounts' of One97 Communications Ltd and Paytm Payments Services are to be terminated at the earliest, in any case not later than February 29, 2024.

One97 Communications, which owns Paytm brand, holds a 49 per cent stake in Paytm Payments Bank Limited but classifies it as an associate of the company and not as a subsidiary.

PayTM Reacts

Responding to the development, Paytm's parent company, One97 Communications (OCL), said that PPBL is actively taking measures to adhere to the directives of RBI. These actions include collaborating with the regulatory body to promptly address their concerns.

"OCL, as a payments company, works with various banks (not just Paytm Payments Bank), on various payments products. OCL started to work with other banks since the start of the embargo. We will now accelerate the plans and completely move to other bank partners," Paytm said. "Going forward, OCL will be working only with other banks, and not with Paytm Payments Bank Limited," it added.

Paytm claimed that its existing offline merchant payment network services, including Paytm QR, Paytm Soundbox, and Paytm Card Machine, will remain unaffected and continue to operate normally. This means that Paytm can still onboard new offline merchants onto its platform.

"With regard to the direction on termination of the nodal account of OCL and Paytm Payments Services Limited (PPSL) by February 29, 2024, OCL and PPSL will move the nodal to other banks during this period," the statement read.

"OCL will pursue partnerships with various other banks, to offer various payment products to its customers," it added. Paytm added that its intention to further grow its payments and financial services sector, but exclusively through collaborative ventures with other banks.

"We offer acquiring services to merchants in partnership with several leading banks in the country and will continue to expand third-party bank partnerships. The Paytm Payment Gateway business (online merchants) will continue to offer payment solutions to its existing merchants," the company said. It further added, "OCL's other financial services such as loan distribution, insurance distribution and equity broking, are not in any way related to PPBL and are expected to be unaffected by this direction."

What Is The Impact Of The RBI Order?

Existing customers are permitted to withdraw and use funds from various accounts such as savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc., up to the available balance, as stated by the central bank.

"Withdrawal or utilisation of balances by its customers from their accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc. are to be permitted without any restrictions, up to their available balance," the central bank said.

Will the measures affect the use of the Paytm app or UPI within the Paytm app?

No, users can still utilize the Paytm app and UPI within Paytm without any limitations, as the app is under the ownership of the parent company and not the Paytm Payments Bank.

What Happens if the Paytm app or the user's wallet is connected to an account maintained by the bank?

If the user's Paytm app or wallet is connected to a bank account, they can still use the app to access and utilize their funds without any limitations. Furthermore, they will continue to receive credits until February 29, 2024. However, starting from March 1, 2024, no credits will be deposited into their bank account or wallet.

Is it allowed to port Paytm wallet to other UPI service like the way mobile network porting are done?

Unfortunately, it is not allowed.