RBI cancels Paytm Payments Bank licence: Reasons, Legal Basis, and Impact for UPSC

Context: RBI cancels Paytm Payments Bank licence

RBI cancelled the licence of Paytm Payments Bank Ltd effective April 24, 2026 after sustained regulatory non-compliance; winding-up proceedings will follow.

PYQ – 2016, Ans – B

Payments Banks

  • Origin: Nachiket Mor Committee, 2013
  • Purpose: Financial inclusion and low-cost digital payments

Model

Niche banks for deposits and payments, not full-service banking

Key Points

  • Deposits up to ₹2 lakh per customer
  • Savings/current accounts, UPI, remittances
  • Debit/ATM cards allowed
  • No lending or credit cards
  • Funds largely invested in government securities

RBI Action Reasons + Legal Basis

RBI used Section 22(4), Banking Regulation Act, 1949.

Grounds

  • Breach of licence conditions under Section 22
  • Persistent non-compliance despite repeated directions
  • KYC/AML lapses and weak due diligence
  • Deficiencies in governance and internal controls
  • Improper conduct of permissible banking activities under Sections 5(b) and 6
  • Threat to depositors’ interest and public interest

Regulatory Trajectory

  • 2022: Bar on new customers
  • 2024: Operational restrictions
  • 2026: Licence cancellation
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