RBI Imposes ₹5.39-Crore Penalty on Paytm Payments Bank for Regulatory Non-Compliance
- ByStartupStory | October 13, 2023
The Reserve Bank of India (RBI) has slapped Paytm Payments Bank Ltd (PPBL) with a monetary penalty of ₹5.39 crore due to non-compliance with various regulatory directives, including Know Your Customer (KYC) procedures, licensing guidelines, cybersecurity framework, and more. The RBI conducted an in-depth examination of PPBL, focusing on KYC and anti-money laundering (AML) practices and carrying out a comprehensive system audit of the bank.
The regulatory review uncovered multiple areas of non-compliance by the bank. PPBL was found to have failed in identifying the beneficial owner of entities it onboarded for payout services. It also neglected to monitor payout transactions and conduct risk profiling of such entities. The bank breached the regulatory ceiling for end-of-day balances in specific customer advance accounts utilizing payout services.
Furthermore, PPBL reported a cybersecurity incident with a delay, failed to implement device binding controls regarding ‘SMS delivery receipt checks,’ and its video-based customer identification process infrastructure allowed connections from IP addresses outside India.
The RBI issued a notice to PPBL, requiring the bank to explain why a penalty should not be imposed for failing to adhere to the said directives. Following the bank’s response and oral submissions during a personal hearing, the RBI concluded that the charge of non-compliance was substantiated, justifying the imposition of the monetary penalty.
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This penalty is enforced under the powers vested in the RBI through the Banking Regulation Act of 1949. The RBI emphasized that its actions are based on regulatory compliance deficiencies and do not pass judgment on the validity of any transactions or agreements between the bank and its customers.
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