Paytm Payments Bank, led by Vijay Shekhar Sharma, Paytm`s first profitable company, is engaged in another legal battle. This time, the legality of the company`s postpaid wallet offering is in question. Given the recent issuances, Paytm`s shares have also suffered a sharp decline, as have their market capitalization. Recently, Paytm Payments Bank Ltd. has been facing data breaches and KYC-related issues with Reserve Bank of India (RBI). Recently, Paytm founder Vijay Shekhar Sharma said Paytm Payments Bank was fully compliant with India`s data retention rules and RBI had not mentioned any concerns about data access. Without addressing RBI`s concerns, the founder said no fines had been imposed for KYC compliance and no issues had been raised with the bank`s ownership structure. The founder has publicly stated that the “concerns are related to IT. They want systems to be audited and validated by third parties. » Delhi HC informs RBI and Paytm Payments Bank The petition states that its postpaid wallet is illegal and violates banking laws and regulations.
The petitioner stated that RBI stated in its RTI application that Paytm Payments Bank had not informed or informed the banking regulator of the operation of the postpaid wallet. By Debjit Sinha: The order from the Reserve Bank of India (RBI) via Paytm Payments Bank has raised some questions among its customers. Paytm`s parent company, One97 Communications, confirmed all fears, saying the RBI order had no impact on Paytm Payments Bank`s (PPBL) existing customers. It is reported that Paytm Payments Bank Ltd., which processes transactions for Indian digital payments giant Paytm, has been prevented from accepting new customers for breaking the rules by allowing data flow to servers overseas and failing to properly verify its customers, according to a person familiar with the matter. Sharma, frustrated by a significant erosion of value, recently noticed that her business model was not understood by the market. Paytm is building a financial services model on a low-margin payment business. But there hasn`t been much progress or scale on the non-payments side, which includes businesses such as loans, insurance and investments, among others. In fact, the latest regulatory measures will allow the group to obtain an SFB (Small Finance Bank) license and enter the lucrative lending sector. Current RBI guidelines allow a payment bank to convert to CRC after completing the first 5 years. Paytm ends its 5th anniversary in June and was interested in an SFB license. ICICI Securities cited the recent case of an embargo against HDFC Bank in a recent report.
“It took 8 months to partially lift the restrictions and almost 15 months to lift them completely,” says ICICI Securities. It is clear that the RBI will not review Paytm`s application for the foreseeable future. The SFB licence would have allowed Paytm to offer small loans and lifted restrictions on savings bank account balances. During that time, RBI gave businesses from Alphabet Inc.`s Google Pay to Walmart Inc.`s PhonePe the opportunity to comply with the above circular and appoint auditors by the end of the year. However, the petition continues to claim that Paytm Payments Bank`s postpaid wallet violates section 1.8 of RBI`s operational guidelines for payment banking because it was not informed of the design, operation or other features of the postpaid wallet. In an opinion on May 27 (Monday), the Delhi Supreme Court, presided over by Chief Justice Rajendra Menon, ordered the Reserve Bank of India (RBI) and Paytm Payments Bank to clarify their position on a public interest dispute against the fintech company for exceeding its banking license. The company stopped registering new customers on June 20, 2018, after RBI made some observations about the new customer acquisition process and compliance with Know Your Customer Standards (KYC). However, in January 2019, the RBI allowed Paytm Payments Bank to resume opening new accounts for its consumers. The bank clarified that the location of the servers was not known and that there was no impact on Paytm Payments Bank Ltd.
storing information abroad. Paytm Payments Bank Ltd. had also taken thousands of customers on board without proper know-your-customer (KYC) documentation, and the concern was that some of them might have been mules for money laundering. The bank was also ordered to hire an IT audit firm to conduct a full audit of its IT system. SEE ALSO | Does Paytm Payments Bank send your data to China? The company refutes allegations of data leakage “Paytm Payments Bank via postpaid wallet supports and facilitates a fraudulent conspiracy with the intent to defraud the bank`s customers through high interest rate loans from third parties not authorized by the Reserve Bank of India to participate in the business/activities or affairs of Paytm Payments Bank”, reads the petition. While RBI had also penalized companies such as American Express Banking Corp. and Mastercard Inc. for violating data retention rules, concerns about Paytm Payments Bank Ltd. are particularly sensitive given India`s hostile political relations with China. India has banned a variety of apps related to or originating in China over the past two years following a clash over the disputed border of nations.
In doing so, the applicant seeks appropriate punitive action against the company, a statement that exempts all customers in arrears of payment of their debts from loan payments to the Paytm postpaid wallet and transfers their profits from Paytm postpaid portfolio operations to the Prime Minister`s Relief Fund for the benefit of the nation. “The sanctions were imposed in the exercise of the powers conferred on the RBI under the provisions of sections 30 and 31 of the PSS,” the press release said. “The Reserve Bank of India, in the exercise of its powers, including under Section 35A of the Banking Regulation Act, 1949, has today ordered Paytm Payments Bank Ltd to stop onboarding new customers with immediate effect,” the central bank said in a statement. If you would like to know how Lexology can advance your content marketing strategy, please email [email protected]. It claims that the postal credit also violates the right to privacy under Article 21 of the Constitution, as the postpaid installation was provided by a third party, Clix Finance India Private Limited, claiming that the customer`s personal data was “fraudulently” shared with him. Inc42 found that no postpaid wallets are activated on Paytm Payments Bank On 11 March 2022, RBI, in the exercise of its powers, including under Section 35A of the Banking Regulation Act 1949, ordered Paytm Payments Bank Ltd.