The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 5.39 crore on Paytm Payments Bank Limited for failing to adhere to certain provisions of the regulatory guidelines on Know Your Customer (KYC) norms. The penalization comes in light of the bank’s violations of specific directives concerning the ‘RBI Guidelines for Licensing of Payments Banks’, ‘Cyber security framework in banks’, and ‘Securing mobile banking applications including UPI ecosystem’.

Following a comprehensive scrutiny from a KYC/AML (Anti Money Laundering) perspective and an extensive system audit conducted by auditors appointed by the RBI, it was uncovered that Paytm Payments Bank had neglected to identify the beneficial owner for entities engaged in providing payout services.

Additionally, the bank was found to have overlooked the monitoring of payout transactions and the implementation of risk profiling for entities availing payout services. The RBI also noted that the bank had exceeded the regulatory ceiling of the end-of-day balance in certain customer advance accounts utilizing payout services.

In response to these findings, the RBI issued a notice to the bank, prompting it to justify the reasons for its non-compliance with the regulatory directives. After considering the bank’s response and the arguments presented during the personal hearing, the RBI concluded that the allegations of non-compliance were valid, resulting in the imposition of the monetary penalty.

It is important to highlight that the penalty reflects the shortcomings in regulatory adherence and does not signify any judgment on the legality of the bank’s transactions or agreements with its customers. It is noteworthy that the RBI had previously restricted Paytm Payments Bank from acquiring new customers and mandated a comprehensive audit of its IT systems due to “material” supervisory concerns identified in the bank.

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