Paytm lands in row, needs to meet RBI guidelines

Recently, the Reserve Bank of India (RBI) asked digital payments major Paytm Payments Bank to stop onboarding new customers quoting ‘likely gaps’ in its technology systems. This has dashed the fintech’s ambition to boost earnings after a costly initial share sale.

"Paytm Payments Bank Ltd’s onboarding new customers are subject to specific RBI permission granted after reviewing the IT auditors’ report,” the banking regulator said in a recent statement. “This action is based on certain material supervisory concerns observed in the bank," RBI added.

RBI stated that it would set the terms of reference for an independent technical audit of Paytm for ‘alleged violations’ of customer acquisition and privacy rules. The central bank cited allegations of ‘possible data sharing with Chinese companies. This allegation was refuted by Paytm founder and major shareholder Vijay Shekhar Sharma.

Paytm will soon be submitting several names as potential auditors soon to RBI for approval, and the regulatory bank is expected to finalize the terms of reference based on the findings that include a ‘series of lapses’ in meeting the Know Your Customer (KYC) norms.

As per sources, the RBI had been repeatedly asking the Paytm payments bank to plug the various gaps in their systems. These were primarily regarding the KYC process of the company, as well as unsatisfactory compliance levels. Accounts that were using the wallet feature did not have their KYC compliance one, and this is clearly not sitting well with the RBI.

Paytm founder Vijay Shekhar Sharma said: "I confirm that in the various observations RBI has shared with Paytm Payments Bank, there is absolutely no reference to any data sharing, outside servers or sharing data with unauthorized personnel national or international," He was denying a Bloomberg report that said data sharing with Chinese entities was the primary reason behind RBI action.