‘Paytm bank curbs tied to outsourcing of decision making’

The Reserve Bank of India’s direction to Paytm Payments Bank restraining it from adding new customers came after the RBI found that the bank had violated licencing norms by outsourcing the decision making on whether an account should be opened or not to business correspondents.

One 97 Communications — Paytm’s parent entity — also acts as a business correspondent for the payments bank. According to RBI norms, banks are allowed to outsource collection and verification of ‘know your customer’ (KYC) documents to a business correspondent. But the onus on deciding whether the account should be opened or not rests with the bank.

“Even the decision making was outsourced,” said a banking source familiar with the development.

Paytm Payments Bank has admitted that the banking regulator’s decision to place a restriction on opening new accounts is due to violation of ‘licencing conditions’.

“Paytm Payments Bank has been asked by Reserve Bank of India to not open new wallets and bank accounts with effect from June 20,” the company said on its platform. “Restriction on new account opening is due to non-adherence to certain licensing and operating guidelines.”

Paytm has clarified that existing wallets and bank accounts continue to function without any restriction. “Those who have minimal KYC wallets can complete their full KYC,” it added.

Paytm Payments Bank declined further comment.

The RBI had also recently restrained Fino Payments Bank from opening new accounts after finding that some of the accounts had more than Rs. 1 lakh. As per norms, the aggregate limit for the customer of a payments bank is Rs. 1 lakh. “RBI advised us not to open new accounts till the upgraded processes are in place,” Fino Payments Bank had said.

Airtel Payments Bank — the third payments bank which is operational out of the seven that received final licences from RBI — had also briefly run afoul of the banking regulator.

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