RBI asks Paytm Payments Bank customers to shift to other banks by March 15

The earlier deadline was February 29, 2024, which the RBI has extended by 15 days keeping in view the interest of customers (including merchants) of PPBL who may require a little more time to make alternative arrangements in larger public interest.

Bengaluru: The Reserve Bank of India (RBI) has extended the deadline for Paytm Payments Bank Ltd (PPBL) to stop facilitating deposits, credit transactions and top ups of customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards (NCMC) and other financial instruments to March 15. Earlier the deadline was set for February 29. The extension has been allowed in view of Paytm Bank’s large consumer base, a bulk of which is made up of merchants, who “may require a little more time to make alternative arrangements,” according to a statement from the central bank on Friday.

As may be recalled, On January 31, RBI barred PPBL from any further banking activities beyond February. It faulted the bank for persistent non-compliance and trigerring continued material supervisory concerns. PPBL had already been barred from onboarding any new customers since March 2022. There is no word yet on how the bank plans to extricate itself from the present predicament.

Paytm’s parent One97 Communications, in an exchange filing on Friday, also announced that Paytm has shifted its nodal account to Axis Bank (by opening an escrow account). A nodal account is a special purpose account created by intermediaries like Paytm to hold funds from participating banks and customers like merchants and vendors. This comes as a relief after Paytm’s UPI services were brought under question on RBI’s February 29 deadline for the company to terminate its nodal account maintained by PPBL and settle all pipeline transactions held in it.

In a document detailing frequently asked questions (FAQs), released on Friday, the central bank clarified that merchants’ Paytm QR codes, soundboxes and point-of-sale (PoS) terminals connected to accounts other than PPBL will remain operational post the deadline. But it urged users to obtain a fresh QR code linked to an account with another bank or wallet to receive payments to avoid any inconvenience or disruption.

Paytm founder and managing director Vijay Shekhar Sharma called the clarification ‘unambiguous’ while stressing that the QR codes, soundboxes and card systems will remain functional as always, urging users in a tweet to not fall for any rumours.

Those using their Paytm bank account to receive paychecks, subsidies, and other monetary credits have similarly been urged to switch to another bank as this won't be allowed after March 15. At the same time, once their available balance runs out, customers won't be able to use their Paytm bank account for automatic payments of EMIs, subscriptions and bill payments.

Since transferring FASTag and NCMC balance is not possible yet, users have been urged to either use up their balance or close the account and ask for a refund.

RBI has directed Paytm to facilitate all these withdrawals and refunds “excluding the ones that are frozen or lien marked by law enforcement or judicial authorities.”

"Further, it is directed that the bank shall facilitate a seamless withdrawal of customer deposits that are parked with partner banks under the automatic ‘sweep-in sweep-out’ facility without causing any inconvenience to such customers," the central bank added.