The Reserve Bank of India has cancelled the licence of Paytm Payments Bank Limited after identifying persistent compliance failures, including serious lapses in Know Your Customer norms and anti-money laundering controls. The action follows supervisory findings that flagged material governance issues at the bank, which is associated with Vijay Shekhar Sharma and One 97 Communications Ltd.
Regulatory reviews found widespread documentation gaps across customer accounts. In numerous instances, a single Permanent Account Number was mapped to hundreds or even thousands of wallets, heightening fraud and identity risk. Investigators also traced certain transactions to illicit activities, including online gambling. Additionally, the bank’s heavy reliance on group infrastructure raised concerns over data governance and operational independence.
Impact on customers and services
Account holders can continue to use or withdraw their existing balances, but fresh deposits and wallet top-ups have been halted. Recharge functionalities for FASTag and National Common Mobility Card issued by the bank have also been disabled, requiring users to migrate to alternative providers.
Salaries, subsidies and other direct benefit transfers credited to Paytm Payments Bank accounts need to be redirected to accounts with other banks. While the disruption has inconvenienced affected customers and merchants, the broader digital payments ecosystem and UPI rail remain fully operational.
Company response and transition plan
Paytm has moved to a partner-bank model to maintain continuity in UPI payments, integrating with Axis Bank, HDFC Bank, State Bank of India and YES Bank. Under this arrangement, users can continue initiating UPI transactions and merchants can keep accepting payments without major changes to front-end experience.
To stabilise operations, the company is reducing costs, streamlining business lines and deploying AI-led process improvements. It has exited certain non-core businesses and undertaken workforce rationalisation to contain expenses. Founder Vijay Shekhar Sharma has surrendered stock options to signal commitment to the turnaround. Management says the focus is now on strengthening compliance, deepening partnerships with regulated entities and rebuilding its financial services franchise.
