RBI extends deadline for Paytm Payments Bank to stop deposits until March 15

The Reserve Bank of India (RBI) on Friday extended the deadline for Paytm Payments Bank to suspend accepting deposits, pushing the cutoff date from February 29 to March 15, 2024.

"Keeping in view the interest of customers (including merchants) of PPBL who may require a little more time to make alternative arrangements and the larger public interest, the following Directions are issued by the Reserve Bank of India under section 35A of the Banking Regulation Act, 1949 in partial modification of the earlier Directions dated January 31, 2024," the central bank said in a statement.

Per the directive, the central bank will no longer allow further deposits or credit transactions in customer accounts, prepaid instruments, or other mediums after the revised deadline, except for specific instances of interest, cashback, or refunds.

However, customers will continue to have unrestricted access to withdraw or use their available balances. Additionally, PPBL is prohibited from providing banking services beyond withdrawals after March 15, 2024, except for fund transfers necessary for customer withdrawal purposes.

Furthermore, nodal accounts with One97 Communications Ltd and Paytm Payments Services Ltd must be terminated by February 29, 2024, with the settlement of pending transactions to be completed by March 15, 2024, the RBI said.

RBI said that the bank must allow customers to withdraw money up to the amount they have in their accounts or wallets. However, if law enforcement authorities have frozen their accounts, they can't withdraw money.

Meanwhile, Paytm added that the QR mechanism, soundbox, and card machine will continue to work beyond March 15. Providing this information on X, the fintech company noted that it has shifted its nodal or escrow accounts to the private entity Axis Bank. It would essentially mean that those who were using the services of Paytm could continue with their activity even after the deadline set by the RBI.

The company recently revealed that its subsidiaries are being investigated by the Enforcement Directorate. Reports say that it is a preliminary examination in light of possible violations of cross-border money transfer rules.

The central bank has also released a list of Frequently Asked Questions (FAQs) for customers.

For those with deposits in partner banks through sweep-in/out arrangements, RBI has said that existing balances can be brought back to Paytm Payments Bank accounts within prescribed limits, though fresh deposits won't be allowed after March 15.

"Sweep-in" and "sweep-out" facilities refer to the movement of funds between a customer's account at a Payments Bank, such as Paytm Payments Bank, and their primary bank account. These facilities allow customers to maintain a balance within the prescribed limit (Rs 2,00,000) for Payments Banks while still having access to larger funds held in their primary bank account.

Similarly, customers can't top-up or recharge FASTags, NCMC (National Common Mobility Card), or wallets post-deadline. Suggestions include procuring new FASTags or NCMC cards from other banks beforehand.

Merchants using Paytm QR codes, soundboxes, or POS terminals linked to accounts with Paytm Payments Bank won't receive credits after March 15, apart from specific exceptions, prompting them to switch setups or update bank account details for payment receipt. Additionally, customers can't receive credits through UPI/IMPS post-deadline, but withdrawals are permitted.

Accounts with liens or freezes due to law enforcement or judicial orders will operate as per authorities' instructions, while internal policy-related liens or freezes allow for withdrawal or transfer of available balances.

What's allowed:

1. Withdrawal: Customers can continue to use, withdraw, or transfer funds from their account up to the available balance.
2. Refunds and Cashbacks: Refunds, cashbacks, sweep-in from partner banks, or interest are permitted credits into the account even after March 15, 2024.
3. Sweep-in from Partner Banks: Existing deposits maintained with partner banks can be brought back to the accounts with Paytm Payments Bank, subject to the prescribed balance limit for a Payments Bank.
4. FASTag and National CMC Usage: Customers can continue to use their FASTag and NCMC cards up to the available balance, but no further funding or top-ups will be allowed after March 15, 2024.

What's not

1. Deposits and Credits: After March 15, 2024, customers will not be able to deposit money into their account with Paytm Payments Bank. No credits or deposits other than interest, cashbacks, sweep-in from partner banks, or refunds are allowed to be credited.
2. Salary, Subsidies, and Benefits: Customers will not be able to receive salary, subsidies, or direct benefit transfers into their account with Paytm Payments Bank after March 15, 2024.
3. Auto Debits and Mandates: While existing auto debit mandates, such as those with OTT subscriptions, or auto EMI deductions, will continue to get executed till there is a balance available in the account, no new credits or deposits will be allowed after March 15, 2024.
4. Money Transfer through UPI/IMPS: Customers cannot transfer money into their Paytm Payments Bank account through UPI/IMPS after March 15, 2024. However, they can withdraw money from their account through UPI/IMPS up to the available balance.

(The copy will be updated with further details.)