Following the Reserve Bank of India’s restrictions, the Employees’ Provident Fund Organisation (EPFO) has announced that it will limit deposits and credit transactions from subscribers’ EPF accounts in Paytm Payments Bank accounts.
The EPFO issued a circular on February 8, 2024, instructing its Field Offices not to accept claims related to bank accounts in Paytm Payment Bank Limited (PPBL) beginning February 23, 2024. Last year, the EPFO authorized its banking division to allow EPF payments through Paytm Payment Bank and Airtel Payments Bank accounts.
On January 31, the RBI imposed restrictions on Paytm Payments Bank, stating that no deposits, credit transactions, or top-ups would be permitted in any of its customer accounts, prepaid instruments, wallets, FASTags, etc. after February 29.
Paytm Payments Bank began operating as a payment bank on May 23, 2017. The central bank granted the bank a licence under Section 22 (1) of the Banking Regulation Act, 1949, to conduct payments bank activity in India. Paytm CEO Vijay Shekhar Sharma was one of 11 applicants who received in-principle clearance to establish a payments bank, as reported in a press release on August 19, 2015.
On Thursday, the central bank reiterated its previous stance against Paytm Payments Bank, claiming that the crackdown was due to its inability to comply with rules despite numerous warnings.
The decision to prohibit Paytm Payments Bank from receiving new deposits was decided after providing the business enough time to address its non-compliance concerns, according to RBI Deputy Governor Swaminathan J during a news conference following the MPC meeting.
During the same news conference, RBI Governor Shaktikanta Das stated that regulated firms are given sufficient time to meet regulatory criteria. He noted that as part of the guidelines, the central bank consults with businesses about compliance difficulties and urges them to take remedial action. However, when such attempts fail, the RBI imposes supervisory or commercial limitations.
He further stated that the RBI is a responsible regulator and would not have taken action if all regulatory criteria had been fulfilled.
Das said: “Our focus is always on engaging with regulated entities bilaterally and we nudge them to take corrective action. We give them sufficient time to take corrective action. Without making any specific references to Paytm, I want to make some general comments about all our regulated entities. One, over the last few years, we have significantly deepened our supervisory approach and methods.”
Paytm’s platform connects over 30 million merchants, with around 20% using Paytm Payments Bank Ltd’s (PPBL) services for financial settlements. The central bank’s move prohibiting fresh deposits into Paytm Payments Bank has sparked fears about interruptions to digital payments.