Excerpt from Businesstoday Article – Published on Oct 13, 2023
In a recent development, Paytm Payments Bank, an associate company of One 97 Communications Ltd. (Paytm), has been slapped with a monetary penalty of Rs 5.39 crore by the Reserve Bank of India (RBI). The penalty stems from non-compliance with key provisions of the RBI’s regulatory framework, including Know Your Customer (KYC) directives, guidelines for licensing payments banks, and cybersecurity protocols for banks, particularly concerning mobile banking applications and the UPI ecosystem.
The central bank’s action is rooted in identified deficiencies in regulatory compliance rather than questioning the legitimacy of specific transactions or agreements between the bank and its customers. The RBI had previously issued a notice to Paytm Payments Bank, prompting it to show cause for its failure to comply with regulatory directions.
Among the highlighted lapses, the RBI stated that Paytm Payments Bank neglected to identify beneficial owners for entities using its payout services and failed to monitor and conduct risk profiling of entities availing of such services. Additionally, the bank breached regulatory limits on end-of-day balances in certain customer advance accounts utilizing payout services. It reported a cybersecurity incident with a delayed response and lacked the implementation of essential device binding control measures, particularly related to the ‘SMS delivery receipt check.’
Responding to the penalty, Paytm assured stock exchanges that its associate company holds the highest regard for the existing RBI regulatory framework and is actively taking measures to ensure strict adherence to supervisory instructions. The bank is presently in the process of complying with additional directives from the RBI to rectify these regulatory shortcomings. This development is expected to impact the market focus on One 97 Communications Ltd. (Paytm) shares.
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