India’s Paytm Payments Bank Faces Regulatory Scrutiny Over Account Setups
In a significant development, India’s central bank, the Reserve Bank of India (RBI), has reportedly identified a large number of accounts at Paytm Payments Bank established without following the mandatory identification procedures. This discovery has raised concerns over potential misuse for money laundering activities.
The RBI’s findings have prompted an immediate information share with India’s financial crime authority, the Enforcement Directorate, alongside notifications to the ministry of home affairs and the prime minister’s office, according to sources close to the matter.
A spokesperson for Paytm Payments Bank affirmed that while some merchants associated with their platforms have come under scrutiny, the bank itself, along with its parent company One 97 Communications Ltd., has not been directly investigated by the Enforcement Directorate. They further emphasized their cooperation with authorities and strongly refuted any allegations of money laundering.
Further complicating matters for the bank, the RBI mandated a cessation of most of its operations, including deposits, credit products, and the widely used wallet service, by the end of February, citing ongoing compliance issues and supervisory concerns.
Reflecting the gravity of the situation, the Enforcement Directorate has been flagged to potentially investigate Paytm Payments Bank pending evidence of illicit activities, as disclosed by Revenue Secretary Sanjay Malhotra.
This news has adversely impacted Paytm’s market presence, resulting in a significant decline in stock value shortly after the RBI’s directive. However, Paytm’s founder, Vijay Shekhar Sharma, remains optimistic, viewing the RBI’s scrutiny as a temporary obstacle.
Details emerging from insiders reveal concerns over several accounts linked to identical identification documents and a substantial number of inactive accounts, sparking further regulatory alarm.
The ongoing investigation into Paytm Payments Bank highlights the intricate challenges faced by digital financial operators in ensuring compliance amid rapid growth and innovation in the sector.
