The Hurdles of Paytm Payments Bank

Visakh Vijayan
3 min readFeb 6, 2024

In November 2017, Paytm finally succeeded in launching the Paytm Payments Bank or PPBL. An initiative to allow an Indian to have a global bank account.

The bank which is registered in Noida allowed all the services a normal bank provides and was licensed by RBI to increase the spread of banking services in the remote areas of the country. However, it received a license of a Restricted Bank under Schedule II of RBI — which means it can not offer credit services like providing loans or issuing credit cards. But other than that it had a savings account (with 2% annual interest), a current account, and even fixed deposits (with returns up to 7.5%). Does that mean it has a physical bank? Well no. It partners with other physical banks to offer these services. Think of it like a wrapper of a list of banks. So your money is actually going into one of the big banks but via Paytm.

Back then opening accounts in other banks was a headache. That is when Paytm came out with online KYCs and quick openings of bank accounts. It was an immediate hit. Plus since Paytm was a super app (providing a range of services) it became a platform for everything related to finance for an Indian — you could recharge your services, pay your bills, buy policies, etc using your wallet.

But with speed comes the increasing risk of making mistakes. In 2018, RBI barred the PPBL from onboarding customers due to KYC irregularities. However, the restriction was lifted a year later after corrections. This didn’t last long as the RBI barred the bank again in March of 2022 for similar issues. Finally, the PPBL got a death knell on 31st Jan 2024 when RBI signed off that the PPBL cannot conduct any further activities of deposits, credit transactions, wallet top-ups, bill payments, etc.

Reasons Given

The reasons given were issues regarding the improper checks of KYCs of customers onboarded. According to reports, there are 35 crore e-wallets out of which only 4 crore are active ones. This is a suspicious number of dormant accounts. Around 1000 accounts were seen registered with a single PAN card which pointed to possibilities of money laundering even.

Future Look Like?

What is the future of PPBL is something that a lot of Indians are waiting eagerly to find out. However, as on date the international transactions are blocked and no further wallet top-ups will be allowed post-Feb 29, 2024. Customers can use the wallet balance they have but nothing after that. The impact was felt in the market too where One97 (the parent company of Paytm) suffered a 40% loss in its share price losing over 20,000 crores in just 3 days. The impact is further felt among other FinTech players in the market who feel the decision was not just.

The future is tricky for the fintech giant but Paytm seems confident of overcoming this hurdle by March this year.

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Visakh Vijayan

Techie from Kerala, India. Days are for coding, nights for weaving tales of tech, travel, and finance. Join me in exploring this multifaceted journey