India’s banking regulator has canceled the license of Paytm Payments Bank Ltd, more than two years after restricting its core business activities, citing violations of rules, and effectively rendering it defunct.
Paytm, which was once backed by SoftBank Group Corp., had been in the cross-hairs of the regulator since at least 2022. India’s central bank virtually shut down the billionaire Vijay Shekhar Sharma-owned bank two years ago, denting much of his business. The move forced him to forge partnerships with other lenders for his wider fintech empire that comprises digital payments, merchant loans, and payment machines. The formal cancellation of the small bank license will have little consequence on the operations of parent One 97 Communications Ltd.
“There is no direct financial impact on the company,” One 97 Communications said in a filing to exchanges on Friday, adding it had already impaired its investment in Paytm Payments Bank. Paytm and its services will continue to operate uninterrupted, it said.
India’s RBI Is Said to Consider Canceling Paytm Bank Permit
The Reserve Bank of India will now make an application before the High Court for winding up the bank, it said in a notification on Friday. An email sent to the company seeking a response wasn’t answered immediately.
“No useful purpose or public interest would be served by allowing the bank to continue,” the RBI said in its notice, adding, the bank “failed to comply with the conditions stipulated in the Payments Bank license issued to it, thereby violating the provisions” of the Banking Regulations Act.
In March, 2022, the RBI had asked the bank to stop adding new customers. Two years later, the banking regulator imposed additional restrictions on the bank which disallowed any further deposits, credits or top-ups in existing customer accounts, prepaid instruments, wallets, etc. Bloomberg had reported that time that the RBI was considering canceling the license of the bank.
Paytm Payments Bank has “enough liquidity” to repay its entire deposit liability upon winding up of the bank, RBI said.
–With assistance from Siddhi Nayak and Sankalp Phartiyal.
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