India’s banking regulator is considering canceling the operating license of Paytm Payments Bank as early as next month once depositors are safeguarded, according to people with knowledge of the matter.
The Reserve Bank of India could act after a Feb. 29 deadline it has set, after which Paytm Payments Bank will bar customers from replenishing their saving accounts or the popular digital payment wallet, the people said.
Violations included misuse of customer documentation rules and non-disclosure of material transactions, they added, asking not to be identified as the details are private.
ALSO READ: Paytm’s Vijay Shekhar Sharma assures users app will keep working beyond Feb 29
No final decision has been reached as yet and the RBI’s thinking may change based on Paytm’s representation, the people said.
The RBI didn’t respond to an email seeking comment.
A Paytm Bank spokesperson said the recent direction from the central bank is “part of the ongoing supervisory engagement and compliance process.” The bank has also heeded to compliance and supervisory instructions from the regulator, the spokesperson said.
Hundreds of thousands of Paytm Payments Bank customers hadn’t submitted know-your-customer documentation, a single identity document was used to register thousands of customers in some cases, and transactions running into tens of millions of rupees — far beyond regulatory limits — were being done in minimum-KYC accounts, which raised money-laundering concerns, according to the people.
ALSO READ: RBI action against Paytm bank: Here’s what happens next for users
India’s banking regulator stunned the finance and tech industries by abruptly suspending much of digital giant Paytm’s business late Wednesday, after multiple warnings over the past two years about questionable dealings between its popular payments app and its lesser-known banking arm, Bloomberg had reported earlier. A possible decision to cancel the permit will be seen as more severe than the one taken by the RBI earlier this week.
ALSO READ: RBI curbs on Paytm Payments Bank not a sudden move, action taken after warnings
Paytm Payments Bank Ltd. operates as a restricted bank that can take deposits but cannot lend. Billionaire Vijay Shekhar Sharma has a 51% stake in the bank and Paytm parent One 97 Communications Ltd. owns the remainder.