RBI Cancels Paytm Payments Bank Licence After Compliance Violations

India’s central bank, Reserve Bank of India, has cancelled the licence of Paytm Payments Bank, citing serious regulatory and compliance lapses. The decision comes more than two years after restrictions were imposed on the bank for failing to meet norms related to customer due diligence, fund usage, and technology systems. The regulator stated that the bank’s operations were detrimental to depositors and public interest, and has initiated steps to wind up the entity.

The payments bank, backed by One 97 Communications and founded by Vijay Shekhar Sharma, had been barred from accepting fresh deposits since early 2024. Its operations were limited to withdrawals and basic services during this period. The RBI reportedly considered alternatives, including a merger, but concluded that cancelling the licence was the most appropriate course of action.

Despite the development, Paytm clarified that the move would not materially impact its business, as the payments bank operates independently. The decision also reflects a broader shift in India’s financial ecosystem, where payment banks have lost relevance due to the rapid growth of digital systems like Unified Payments Interface. Rising compliance costs and reduced utility have made the model less viable, putting the future of such specialised banking entities under scrutiny.

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