The Reserve Bank of India on Friday canceled the banking license of Paytm Payments Bank Ltd, ceasing its operations as a bank with effect from April 24. “The Reserve Bank of India (RBI) has canceled the banking license issued to Paytm Payments Bank Limited under Section 22(4) of the Banking Regulation Act, 1949 (‘BR Act’) with effect from the close of business on April 24, 2026,” the RBI said in its order.This means that the bank can no longer carry on any ‘banking’ activity or any other related business as defined under the law with immediate effect. “Consequently, Paytm Payments Bank Limited is prohibited from conducting ‘banking’ business as defined in Section 5(b) or any additional business specified under Section 6 of the Banking Regulation Act, 1949 with immediate effect.”The central bank will now approach the High Court to initiate the process of winding up the bank. It said the bank has enough liquidity to make payments to all its depositors once the liquidation process begins. “Paytm Payments Bank Limited has sufficient liquidity to repay its entire deposit liability upon winding up of the bank.”Why did RBI cancel the license:(i) The bank was conducted in a manner that harmed its own interests as well as the interests of its depositors, thereby non-compliance with Section 22(3)(b) of the BR Act, the RBI said in its order. (ii) The overall conduct of the management of the Bank was found to be against the interests of the depositors and the public, resulting in violation of Section 22(3)(c) of the BR Act. (iii) No useful purpose or public interest would be served by allowing the Bank to continue operating, as mentioned under Section 22(3)(e) of the BR Act. (iv) The Bank did not fulfill the conditions prescribed under its Payments Bank License, thereby violating Section 22(3)(g) of the BR Act.The move follows earlier restrictions on the bank when it was ordered to stop adding new customers from March 11, 2022. Later, on January 31, 2024 and February 16, 2024, the RBI barred any fresh deposits, credits or top-ups to customer accounts, prepaid instruments and wallets.
