Paytm to Onboard New Customers: RBI Lifts Ban
Paytm Payments Bank stopped enrolling new customers on June 20, 2018, following an audit by the RBI. The RBI closely observed that Paytm was violating the KYC (Know Your Customer) rules while onboarding its customers. It failed to maintain a net worth limit of Rs 100 crore. The RBI also revealed that Paytm violated the end-of-the-day Rs 1 lakh limit per account.
But 2019 seems to be a very lucky year for Paytm as RBI has finally permitted Paytm to restart opening new accounts for its consumers. The Paytm Payments Bank also decided to start with the KYC (Know Your Customer) formalities from December 31st, 2018 for both its wallets and bank accounts.
About Paytm Payments Bank
The Paytm payments bank was launched in May 2017 and the Paytm Payments Bank is the first mobile bank which features zero charges on the online transactions including RTGS, NEFT and IMPS with no minimum balance requirement. With regards to the savings account, the Paytm bank offers an interest of 4% per annum.
The Backstory to Paytm’s Ban
The various reports revealed that Paytm was modifying its “account opening process to introduce ‘current accounts’ due to which new account creation process had been paused.”
Besides this, Paytm removed Renu Satti as the chief executive of the payments bank following the RBI’s objections about her ability to lead a banking services firm. Further, in October 2018, it then appointed veteran banker Satish Kumar Gupta as managing director and CEO for the payments bank.
Well, this is not just the story of Paytm alone. Airtel Payments Bank and Fino Payments Bank also faced a similar situation from the RBI’s side. The central bank also imposed a fine of $136.9K (INR 1 Cr) on Fino Payments Bank Limited on October 31, 2018, for allegedly opening new accounts despite directions not to do so. The ban on both banks has now been lifted as well. But it is to be noted that no such fine was levied on Paytm Payments Bank by RBI, as stated by a company spokesperson in a media statement.
The Major Reasons for the Paytm Ban by RBI
The sole reasons for the RBI decisions were undoubtedly the low level of deposit amount maintained by the Paytm Payments Bank. Payments banks in India have remained highly unsuccessful over the past years. The total deposits of the payments bank have been a total sum of $74.5 Mn (INR 540 Cr) as of May 2018. Airtel Payments Bank deposited $42.3 Mn while Paytm Payments Bank deposited $26.7 Mn (INR 193.68 Cr). The funds deposited by these payments banks are much lower when compared to the funds mobilised by large bank branches.
The Future of Paytm Payments Bank
Paytm Payments Bank has reported having around 42 Mn accounts and has set a target of reaching 100 Mn by the end of 2019. Paytm Payments bank has also set an aim to invest $500 Mn in KYC operations in order to reach 500 Mn bank accounts by 2020.
In addition to these, Mukesh Ambani-led Reliance Group’s Jio is also starting with live beta trials for its payments bank services named as Jio Payments Bank. Paytm Payments Bank is reported to have around 42 Mn accounts and has set a target of reaching 100 Mn by the end of 2019. Paytm Payments Bank had set an aim to invest $500 Mn in KYC operations in order to reach 500 Mn bank accounts by 2020.