In January 2024, India’s banking regulator, the Reserve Bank of India (RBI), ordered Paytm Payments Bank to stop conducting business due to compliance issues uncovered in an audit. The RBI had previously ordered the bank to stop accepting new customers pending the audit. The exact nature of the noncompliances and supervisory concerns were not immediately clear. The bank must cease banking activities after February 29, meaning it cannot take deposits, allow credit transactions, or permit top-ups on customer accounts after that date.
Paytm Payments Bank was fined by the RBI in October for noncompliance with know your customer regulations and for violating end-of-the-day balance regulations in certain customer advance accounts. The bank had also delayed reporting a cybersecurity incident. The news of Paytm’s bank closure comes as the company and other Indian fintechs struggle to contend with recent RBI measures dealing with smaller, unsecured loans. The regulator mandated that lenders change their capital requirements to prevent outsized consumer debt and delinquencies.
In response to the rule changes, Paytm announced in November that it would make fewer small loans and instead focus on offering higher-ticket loans to consumers and merchants.
