Uncertainty Looms Over Future of Paytm Payments Bank Ltd (PPBL) as RBI Takes Action

The future of Paytm Payments Bank Ltd (PPBL) appears uncertain as the Reserve Bank of India (RBI) steps in to address ongoing issues within the institution. Citing persistent non-compliances and supervisory concerns, the RBI has invoked Section 35A of the Banking Regulation Act. This move has sparked speculation about potential changes in ownership or amalgamation with another player in the sector.

To address the situation, PPBL’s board has been reconstituted, with the appointment of ex-bankers and bureaucrats as independent directors. Notable additions include individuals like S Sridhar, Debendranath Sarangi, Ashok Kumar Garg, and Rajni Sekhri Sibal.

One significant development is the withdrawal of One 97 Communications Ltd’s (OCL) nominee from the board, with Vijay Shekhar Sharma, owning a majority stake in PPBL, stepping down as Part-Time non-executive Chairman and Board member.

The RBI’s decision to halt PPBL from onboarding new customers underscores the severity of the situation. This action, taken on January 31, 2024, is aimed at safeguarding depositors’ interests and ensuring proper management.

PPBL, which boasts approximately 35 crore ewallets, has faced scrutiny due to an alarmingly high number of dormant accounts, estimated at around 31 crore. Concerns over KYC irregularities have also been raised, exposing customers and depositors to risks. Despite previous directives from the RBI to address these issues, non-compliances persisted.

Supervisory restrictions were imposed in March 2022, prohibiting PPBL from onboarding new customers and mandating an external audit. Additionally, various law enforcement agencies have frozen accounts and wallets linked to digital frauds, prompting investigations into potential money laundering activities.

The Enforcement Directorate (ED) conducted raids on PPBL and its parent entity, One97 Communications Ltd (OCL), in September 2022, as part of efforts to crack down on illegal digital loan companies. Allegations of routing proceeds of crime through e-wallets have further intensified scrutiny on PPBL’s operations.