(Image source from: Dailypioneer.com)

RBI issues instructions to Paytm Payments Banks:- The Reserve Bank of India (RBI) directed the Paytm Payments Banks to stop onboarding new customers with immediate effect. This is a huge setback for the digital finance services of Paytm. RBI took the call based on several material supervisory concerns that are observed in Paytm Payments Bank. Paytm has been asked to appoint an information technology audit firm to conduct a system audit of the IT system.The press release of RBI said "Action against Paytm Payments Bank Ltd under section 35 A of the Banking Regulation Act, 1949. The RBI has today, in exercise of its powers, inter alia, under section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank Ltd to stop, with immediate effect, onboarding of new customers".

RBI added saying "The bank has also been directed to appoint an IT audit firm to conduct a comprehensive System 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 report of the IT auditors. This action is based on certain material supervisory concerns observed in the bank". Paytm Payments Bank will approach RBI for a small finance bank license in June. Paytm founder and CEO Vijay Shekhar Sharma expressed his interest of floating a small finance bank so that it would the payment issues of the digital platform. The existing payment banks with a successful track record of five years can apply for the conversion into SFB as per the RBI guidelines.