RBI Ban on Paytm: What Paytm Users Need to Know about Their Accounts

The ban on Paytm will not have any negative impact on Paytm users and your money is safe
Paytm - RBI - apex bank of India - TAXSCAN

“RBI banned Paytm”! Really?  This was the reaction of each and every person who heard about this. And many even created memes related to this. Was that an overnight decision? The answer is no. A company which has 100 million monthly transaction users has been banned by the apex bank of India without any empathy. Why? What regulatory violations could be done by the biggest online banking platform.


Paytm Payments Bank Private Limited, an Indian multinational financial technology company, that specialises in digital payments and financial services, based in Noida, India which comes under the regulatory arms of Reserve Bank of India ( RBI ).

On 31st January 2024, the reserve bank issued a press release stating that “Action against Paytm Payments Bank Ltd under Section 35A of the Banking Regulation Act, 1949”. The RBI has completely banned the future actions of Paytm after 29th February 2024. The apex bank has asked the banking company to stop onboarding new customers.

What Paytm Users Need to Know about Their Accounts

From street vendors to big company CEOs are using the same application for their transactions. So, we can’t push back the importance of this platform. As a Paytm account holder, each and every common citizen in India would be worried about the future of their accounts. To all account holders, there is no need to worry about having accounts in paytm. The RBI has assured that the account users can use their account up to their available balance.

  1. The Paytm holder cannot make further deposits or credit transactions or top ups, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024.
  2. However, the interest, cashbacks, or refunds which may be credited anytime to the account which ensure that the money in any way is safe.
  3. The Paytm holders can withdraw or utilise balances from your accounts including savings bank accounts, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc. are to be permitted without any restrictions, up to their available balance.
  4. Also, no other banking services, other than those referred to above, like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc.), BBPOU and UPI facility should be provided by the bank after February 29, 2024.

Thus, there will be no adverse effect on the paytm users even after the ban of the Paytm. And what you can do next:

  1. You can stop using the application till the issues are resolved as the company is big and definitely the RBI will lift the ban or,
  2. You can completely stop using paytm and shift to other platforms which your own bank provides or other private platforms which are available for Fastags, NCMC cards..etc.
  3. You can withdraw the money completely and close the bank account.

The RBI directed the Paytm company to settle all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) by March 15, 2024 and no further transactions shall be permitted thereafter. Also directed to terminate the Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd at the earliest.

What could be the reason for the ban?

No Reasons are Clear.

Apart from the press releases, both RBI and Paytm have not spoken a single word on the issue going on. In 11th March 2022, the RBI, vide press release has directed the paytm not to onboard new customers and will be subject to specific permission to be granted by RBI after reviewing report of the IT auditors. Also, the apex bank directed to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system. Paytm Payments Bank, formed in 2017, currently hosts over 330 million wallet accounts and has 100 million monthly transacting users. Thus, to maintain this ban for a long term by the RBI is not a possible one.

According to the reports by Money control, a requested anonymous person said that there were several violations of regulatory norms, including rules related to money laundering and related-party transactions, and repeated failure to heed warnings from the RBI over an extended period.

“There were large volumes of transactions via merchant accounts where the audit found that proper KYC measures were not taken to establish the origin of funds,” the anonymous person said.  Yet, the RBI has not furnished any details to validate or refute his statement.

According to Macquarie, “We have seen the RBI take 15 months to revoke its ban on digital business activities of the largest private sector bank. However, in this case, since the first ban (in March 2022) for onboarding new customers (22 months have lapsed), RBI has conducted a comprehensive IT audit and continued to identify non-compliance, which in our view indicates that these lapses are quite material,”, reported The Mint.

What Paytm Founder said?

The Paytm founder Vijay Shekhar Sharma, through platform ‘X’ said that:

“To every Paytmer,

Your favourite app is working, will keep working beyond 29 February as usual. 

I with every Paytm team member salute you for your relentless support. For every challenge, there is a solution and we are sincerely committed to serve our nation in full compliance.

India will keep winning global accolades in payment innovation and inclusion in financial services – with PaytmKaro as the biggest champion of it.”

In 2022, a similar situation happened to HDFC bank too. In December 2020, the RBI directed HDFC Bank to cease all launches of its forthcoming digital business initiatives and the acquisition of new credit card customers. This action was prompted by recurrent outages at the bank’s data centre, causing disruptions to its operations. However, in 2022, the RBI removed the ban. Similarly, we can expect that the ban of Paytm will be lifted as soon as possible.

However, whether the ban is lifted or not, it is the right of all account holders and the public to be informed about the violations committed by Paytm. Ideally, the central bank will release a press statement or provide comprehensive details about the issue without any concealment. After all, it is the people who sustain the company, and it involves the public’s funds. Consequently, individuals have the right to decide whether to continue with Paytm for their future transactions.

Paytm Stock Shares update

Paytm’s stock witnessed a 20% decline, bringing the current share value to Rs. 487.20 after the ban by the RBI. Yesterday, the closing value was Rs. 609 and today when the market closed at 3:30 pm, the value again went down to Rs. 487.20.

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