RBI cancels Paytm Payments Bank’s licence:Customers can still use Paytm UPI, withdraw money from bank accounts

The Reserve Bank of India (RBI) has cancelled the banking license of Paytm Payments Bank Limited. The RBI interdict states that consequently, the payments bank cannot conduct ‘business of banking’ as defined in Section 5 (b) of the Banking Regulation Act, 1949. What does ‘business of banking’ mean? According to the Section 5 (b) of the Banking Regulation Act, 1949, business of banking’ has a very specific definition. It means: So, Paytm Payments Bank Limited will not be able to accept deposits from public and give loans. Can people withdraw money from Paytm Payments Bank account? If you have money lying in your Paytm Payments Bank account, you can still withdraw it or transfer it to another bank account until your balance becomes zero. But they cannot add money to their account. Can people use Paytm app to send money to each other? The Paytm app is different from the bank. They can still use the app to make UPI payments if it is linked to a different bank (like SBI, HDFC, or ICICI). But they won’t be able to add any new money, salary, or deposits into their Paytm Payments Bank account. Can customers withdraw money from Paytm Payments Bank account? The RBI order clearly states that the bank has enough money to payback all the money deposited by the bank account holders. So, no account holder will have any problem in withdrawing money deposited in the Paytm Payments Bank account. How much money can people withdraw from their bank accounts? If a bank fails or loses its license, a government organisation called the DICGC (Deposit Insurance and Credit Guarantee Corporation) steps in to protect you. The DICGC automatically insures your deposits. This includes your savings, fixed deposits (FD), and current accounts. How Much money is insured? Each customer is insured for up to ₹5 Lakh per bank account What it Covers: This limit includes both your original deposit (principal) and the interest you earned. So even if the Paytm Payments Bank runs out of cash, the account holder’s money is safe upto a limit of ₹5 lakh per account. They would still be able to withdraw up to ₹5 lakh from their bank account. Key facts: Only Paytm Payments Bank services have been banned and not of Paytm UPI. Paytm’s UPI and wallet would continue to function through partner banks. All services such as IMPS, fund transfers, etc linked with Paytm Payments Bank accounts will be disabled. Parent company’s clarification on RBI order One 97 Communications Limited on Thursday said its key services, including the Paytm app, Paytm UPI, Paytm QR, Soundbox, card machines and Payment Gateway, will continue to operate uninterrupted. In an exchange filing, the company clarified that its broader ecosystem, including Paytm Gold and Paytm Money, remains unaffected and will continue normal operations. “As previously disclosed on March 1, 2024, the Company does not have any exposure to PPBL or any material business arrangements with PPBL. No services provided by the Company are in partnership with PPBL. Additionally, PPBL operates independently, with no board or management involvement from the Company,” the company said in its exchange filing. Paytm said its services have been operating without interruption and will continue to do so, underlining that the RBI’s action should be viewed strictly in the context of PPBL and not the listed entity. Background: Paytm Payments Bank commenced operations as a payments bank with effect from May 23, 2017. The Reserve Bank had issued a licence to the bank to carry on the business of payments bank in the country. The bank has been under the RBI lens over the past many years. Previously, the bank was directed to stop onboarding new customers with effect from March 11, 2022. Thereafter, on January 31, 2024 and February 16, 2024, certain business restrictions were also imposed on the bank, including disallowing any further deposits/credits/ top-ups in existing customer accounts, prepaid instruments, and wallets. And now the banking licence has been completely scrapped. One97 Communications Ltd (OCL) owns the Paytm brand.