The Reserve Bank of India (RBI) has imposed strict measures on popular wallet Paytm and its banking arm due to concerns over money laundering and questionable dealings involving hundreds of crores of rupees, according to sources.
RBI has directed Paytm Payments Bank Ltd (PPBL) to halt most of its business activities, including accepting further deposits, conducting credit transactions, and carrying out top-ups on customer accounts, prepaid instruments, wallets, and cards for paying road tolls after February 29.
Customers will be able to access their existing deposits and pay for services with money stored in their wallets until February 29. However, if RBI does not relent, top-ups for the Paytm wallet will cease, and transactions through it will no longer be possible.
The central bank’s action comes after it found serious Know Your Customer (KYC) Anti Money Laundering violations, including lakhs of non-KYC compliant accounts and instances where single PANs were used for opening multiple accounts.
There were also concerns about transactions beyond regulatory limits in minimum KYC pre-paid instruments, raising money laundering concerns. Paytm Payments Bank reportedly has about 35 crore e-wallets, with around 31 crore dormant accounts and only about 4 crore operative with either no balance or a small balance, which could be prone to being used as mule accounts.
Despite RBI’s earlier directives to address these deficiencies, the bank’s compliances were found to be incomplete and false on many occasions. As a result, RBI imposed supervisory restrictions on PPBL in March 2022, directing it to stop on-boarding new customers immediately and appoint an external audit firm for a comprehensive system audit.
Several accounts and wallets have been frozen by law enforcement agencies across the country for being used in digital frauds. The Enforcement Directorate (ED) conducted raids at the premises of PPBL and its parent entity One97 Communications Ltd (OCL) in September 2022 as part of a probe under the criminal sections of the Prevention of Money Laundering Act (PMLA).
The ED’s investigation revealed alleged proceeds of crime routed through e-wallets and other payment aggregators. ED will further probe money laundering allegations if required.
Following RBI’s actions, shares of One97 Communications Ltd, which owns the Paytm brand, plummeted 40 per cent in the last two days. The stock hit its lowest trading permissible limit on Friday, leading to a significant erosion in the company’s market capitalization.
