Paytm crisis: One of the reasons for the Reserve Bank of India (RBI) to impose restrictions on Paytm Payments was reportedly hundreds of accounts created without proper identification. These accounts created without proper know-your-customer (KYC) details conducted transactions worth crores on the platform, triggering potential money laundering concerns, NDTV reported citing sources.
Over 1,000 users were found to have linked with the same permanent account number (PAN) with their accounts. As per sources, an “unusually” high number of dormant accounts were also found.
During their verification processes, the central bank and auditors found that the compliance submitted by Paytm Payments Bank was incorrect. Apart from informing the Enforcement Directorate, the central bank has shared its findings with the ministry of home affairs and the prime minister’s office.
Furthermore, undisclosed major transactions within the group and linked parties have amplified regulatory concerns. The RBI also found governance issues, especially in the connection between Paytm Payments Bank and its parent company, One97 Communications Ltd.
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“One 97 Communications Ltd. and Paytm Payments Bank have never been probed by the Enforcement Directorate,” a Paytm Payments Bank spokesperson said.
“Some merchants using our platforms have been the subject of investigations and we answer authorities on the same as and when asked. We strongly refute money laundering allegations and caution you against speculation,” the spokesperson further said.
This has raised data privacy issues and led to a temporary halt on transactions via Paytm Payments Bank. The bank’s operations will be dependent on third-party banks until February 29.
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The company’s stock plunged 10 per cent on Tuesday morning to 48 per cent in four days following the RBI’s notice.
Paytm’s founder, Vijay Shekhar Sharma, referred to the regulatory actions as a ‘speed bump’ during a conference call with analysts, in a bid to calm stakeholders amidst the current upheaval.
Meanwhile, a group of startup founders wrote to RBI governor Shaktikanta Das and finance minister Nirmala Sitharaman asking them to reconsider RBI’s action against Paytm’s payments bank unit. They urged RBI to reassess the “proportionality of restrictions” on Paytm considering the likely impact on the payments bank, fintech ecosystem and broader economy.
