• UGI USER
  • Feb 02, 2024
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RBI’S ACTION AGAINST PAYTM PAYMENTS BANK

Why in the News?

  • RBI bars Paytm Payments Bank from offering key services like deposits, prepaid instruments, FASTags, etc., after February 29 due to persistent non-compliances.
  • Customers allowed withdrawal or utilization of balances without restrictions.

Probable Reasons for RBI’s Move:

  • RBI scrutiny on Paytm Payments Bank since 2018, possibly due to concerns over KYC compliance and FT-related issues.
  • Lack of information barriers within the group and data access to China-based entities, raising regulatory concerns.
Source: MINT
About Payment Banks

·   Payment banks (e.g., Airtel Payments Bank, India Post Payments Bank) function similarly to traditional banks but operate on a smaller scale.

·   Dr. Nachiket Mor-led committee proposed the concept of ‘Payments Bank’ to serve lower-income groups and small businesses.

·   They lack credit risk involvement and offer limited services; they handle typical banking operations but cannot provide loans or issue credit cards.

·   Payment banks solely accept demand deposits, like savings and current accounts, excluding time deposits.

·   They are restricted from establishing subsidiaries for non-banking financial activities.