Learning From Paytm Payments Bank

Paytm has been in the news since the central bank, Reserve Bank of India (RBI), put stringent restrictions on the operations of its group company, Paytm Payments Bank Limited (PPBL) on 31^st January 2024.

The restrictions imposed by RBI shall impact the Paytm Wallet (including the sub-wallets for food and fuel) and the Paytm Payments Bank Accounts, into which money cannot be deposited after 15^th March 2024, though the money can be transferred or withdrawn. Further, the Paytm Fastag users and Transit Card (National Common Mobility Card) users shall have to switch to another provider after 15^th March 2024. It may be noted here that the earlier time limit was 29^th February 2024.

The rationale given by RBI for these severe restrictions is justified on grounds of “persistent non-compliance” by PPBL. According to RBI, which typically takes such decisions based on financial stability and consumer interest, PPBL has infringed the regulatory framework for the operations of a payments bank as delineated below :

• Violations of KYC norms in case of lakhs of accounts
• The inability of PPBL to maintain an arm’s length distance from its parent company viz. One97 Communications

PPBL has denied any irregularities in both the aforementioned areas and has set up a high-powered Group Advisory Committee to look into the matter in greater detail. But a lesson learned from this case is the laxity observed by the compliance functionaries of PPBL, despite repeated observations made to this end by RBI over the last 2 years. This case points to the need for a strong Compliance Function within each financial services firm.

It is here that Concat Business Consulting can offer expert advice about regulatory compliances to be adhered to for the smooth operations of a firm. Furthermore, suppose a full-time resource is either unavailable or unaffordable. In that case, Concat can put in place a virtual Chief Compliance Officer (vCCO) to ensure regulatory compliance, who shall do the needful, and that too, at a fraction of the cost of a full-time resource.