Paytm Payments Bank's Inadequate KYC Prompted RBI Crackdown — Exclusive

Material lapses in the conduct of the payments bank has resulted in supervisory concerns from the RBI. Over 1,000 users were found to have linked the same PAN to their accounts, the people mentioned above told NDTV Profit on the condition of anonymity.

This has led to concerns over money laundering.

The compliance submitted by the bank was found to be incorrect on several instances when the RBI, as well as auditors conducted verification, the people quoted above said.

There were some concerns over non-disclosure of major transactions within the group and parties related to the group, they said.

The central bank also found loopholes in the governance standards at Paytm Payments Bank, in terms of linkage between the payments entity with its parent company One97 Communications Ltd., they said.

Transactions routed through the parent app raised data privacy concerns.

While the RBI's action will not impact user deposits in their saving accounts, wallets, FASTags and NCMC accounts until Feb. 29, the company will have to look at third-party banks to conduct its operations, it had said in an exchange filing on Feb. 1. No transactions will be routed through Paytm Payments Bank, the company said.

In March 2022, the RBI had stopped the Paytm Payments Bank from onboarding new customers onto the platform.

On Feb. 2, the RBI reiterated its warning about frauds disguised as KYC updates, and urged people to stay cautious about unsolicited phone calls, text messages and emails to confirm personal information.

Such communications often create false urgency and manipulate customers to share crucial details, through which fraudsters gain unauthorised access to their accounts, the RBI said.

"In the wake of continuing incidents/reports of customers falling prey to frauds being perpetrated in the name of KYC updation, RBI once again urges the members of public to exercise caution and due care to prevent loss and safeguard themselves from such malicious practices," the RBI said.