The Reserve Bank of India (RBI), in its latest order released today, has barred Paytm Payments Bank from onboarding new customers with immediate effect due to “certain material supervisory concerns” observed in the bank.

The central bank said the Paytm Payments Bank has been directed to appoint a firm to conduct a comprehensive audit of its IT system. “Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing a report of the IT auditors,” the RBI order said.

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The RBI said that the action is based on certain material supervisory concerns observed in the bank. However, the RBI did not provide any details. The stricture has been imposed under Section 35A of the Banking Regulation Act.

The move comes months after Paytm’s parent firm One97 Communications saw a poor listing amid concerns around the company’s valuation.

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The Vijay Shekhar Sharma-led Paytm Payments Bank was incorporated in August 2016 and started operations in May 2017 after receiving its banking licence. One97 Communications and Sharma together own Paytm Payments Bank.

This is the second time the RBI has imposed restrictions on the payments bank. In August 2018, the banking regulator took a similar action citing violations of know-your-customer (KYC) norms.

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In December 2021, Paytm Payments Bank had announced that it had received the RBI’s approval to operate as a scheduled payments bank. The bank said it had been added to the second schedule of the Reserve Bank of India Act, 1934.

As of March 31, 2021, Paytm Payments Bank had 64 million savings accounts and over Rs 5,200 crore in deposits.

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Earlier in December 2021, Paytm Payments Bank announced it had received more than 926 million UPI transactions, making it the first beneficiary bank in the country to achieve this milestone.

Paytm Payments Bank had registered 2,507.47 million beneficiary transactions from October to December 2021, compared with 964.95 million in the same quarter in 2020. This is a year-on-year increase of 159.85%.