The Reserve Bank of India (RBI) recently imposed a fine of ₹5.39 crore on Paytm Payments Bank for failing to adhere to certain RBI guidelines related to Know Your Customer (KYC) procedures, cybersecurity, and other regulations. The penalty was specifically due to Paytm’s non-compliance with provisions outlined in the ‘Reserve Bank of India (KYC) Directions, 2016,’ ‘RBI Guidelines for Licensing of Payments Banks,’ ‘Cybersecurity Framework in Banks,’ ‘Guidelines on Reporting Unusual Cybersecurity Incidents,’ and ‘Securing Mobile Banking Applications, including UPI ecosystem.’
RBI’s decision was based on an assessment of regulatory compliance shortcomings, a review of a special scrutiny report, a comprehensive system audit report, and other relevant documents. Among the issues identified, Paytm Payments Bank failed to identify the beneficial owners of entities using its payout services, didn’t adequately monitor payout transactions, and neglected to conduct risk profiling of entities availing payout services.
Additionally, Paytm Payments Bank exceeded the regulatory limits on end-of-day balances in certain customer advance accounts related to payout services. The bank also failed to implement a control measure known as ‘SMS Delivery Receipt Check’ and allowed connections from IP addresses outside India within its V-CIP infrastructure.
Before imposing the penalty, RBI had issued a notice to Paytm, inquiring why a penalty should not be applied for non-compliance with these directions. Following the company’s response, RBI decided to impose the ₹5 crore fine on Paytm Payments Bank.
By FCCT Editorial Team
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