Everything You Should Know about the RBI Penalty on Paytm

RBI Penalty on Paytm more than 1 Crore: KYC compliance Failure

Paytm launched its payments bank in November 2017. It has over 100 million KYC users and this bank adds 0.4 million new users each month. The Reserve Bank of India has penalised the Paytm Payments Bank because it violated KYC norms. The RBI has imposed a 5.39 crore rupees monetary penalty on the Paytm Payments Bank. 

The central bank released a press release on 12 October 2023. This press release revealed that the regulator for non-compliance has taken action with certain provisions of the RBI Know Your Customer (KYC) Directions 2016. Continue reading to learn more about guidelines violated by the Paytm Payments Bank and RBI penalty on Paytm. 

Scrutiny of Paytm Payments Bank from KYC/AML

The Reserve Bank of India has carried out a special scrutiny of the penalized party from the Know Your Customer/Anti-money Laundering perspective. Auditors have conducted an extensive system audit of the Paytm payments bank. 

The audit report, special scrutiny report, and other assessments have exposed inter alia, non-compliance with the directions provided by the Reserve Bank. The Paytm Payments Bank has failed to recognize the beneficial owner from the entities it has onboarded to deliver payout services. 

The RBI has also stated that the Paytm Payments Bank has not carried out risk profiling of information before providing services. Results from the report proved that the private bank is not following the RBI guidelines. Therefore, the Reserve Bank of India applied an appropriate monetary penalty on the Paytm Bank for not following the RBI transaction rules and guidelines. 

Is RBI’s Penalty on the Paytm Payments Bank Appropriate?

The Reserve Bank of India has carried out an extensive audit and assessment before penalizing the PPBL. It revealed the payments bank has violated the regulatory ceiling of “end of the day balance” in the advance accounts of several customers. The report also talks about cyber security issues and payment-related issues. 

The Paytm Payments Bank has not been able to implement device binding control measures associated with “message delivery receipt check”. It did not prevent connections from IP addresses located in foreign countries. All those issues created troubles for the Paytm Payments Bank and it got penalized by the RBI. 

Is Paytm RBI approved?

Over 9.3 crore people use Paytm in India for shopping, making UPI payments, and other purposes. Many of them also use the Paytm Payments Bank. Most of those users do not know “is Paytm RBI approved or not. 

Yes, the Paytm Payments Bank is an RBI-approved platform that allows users to make instant transactions. RBI caught discrepancies in Paytm’s operations and therefore it has imposed a 5.39 crore rupees penalty on Paytm. 

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Frequently Asked Questions 

Q: Does Paytm follow RBI transaction rules?

A: Yes, this platform follows RBI transaction rules, but it has failed to comply with certain RBI guidelines.

Q: Is Paytm under RBI?

A: No payment bank can operate in India without the RBI’s approval. So, Paytm Payments Bank is under RBI. 

Q: Is Paytm the most widely used UPI app in India?

A: No, PhonePe is the most widely used UPI application in India with more than 400 million active users. 

Q: RBI imposed a penalty on which bank?

A: The Reserve Bank of India has imposed a penalty on the Paytm Payments Bank. 

Q: Is Paytm Payments Bank safe?

A: This bank provides cutting-edge security features, but the RBI’s action against this bank may concern many users. 

ALSO READ: PayTm Blow: Manju Agarwal Resigned as independent director of Paytm Payments Bank

Conclusion

The RBI Penalty on Paytm is not good news for the bank because it can severely affect its image. Customers across the country will learn how the PPBL failed to comply with the RBI rules and regulations. They may switch to other platforms to ensure top-notch safety.