The Reserve Bank of India has cancelled the banking licence of Paytm Payments Bank, citing serious governance and compliance concerns, and stating that the conduct of its management was detrimental to depositors’ interests.
The action, taken under Section 22(4) of the Banking Regulation Act, 1949, is effective from April 24. The RBI will now approach the High Court for winding up the bank.
Paytm Payments Bank is now barred from carrying out any banking business
The RBI said the bank’s management was “prejudicial to depositors and public interest”
This marks a rare instance of outright licence cancellation in recent years
The move follows years of regulatory curbs:
March 2022: Bank barred from onboarding new customers
February 2024: Prohibited from deposits, credit transactions, and wallet top-ups
April 2026: Licence cancelled
Sources indicated that with operations already severely restricted, cancellation became the only viable regulatory option.
Parent company One97 Communications clarified that the decision will not impact its financials or operations.
No exposure or material business linkage with Paytm Payments Bank
Investment in the bank was fully impaired as of March 31, 2024
Core services such as UPI, payment gateway, soundbox, and card machines continue as usual
The company also said the payments bank operates independently, with no board or management overlap.
The RBI has assured that depositors’ funds remain safe and repayable.
Bank has sufficient liquidity to repay all deposits upon winding up
Total deposits stood at ₹1,395.22 crore as of March 31, 2025
Gift instruments outstanding: ₹33.13 crore
Customers can continue to withdraw or use their balances up to available limits
The central bank said allowing the bank to continue operations would serve no public interest.
The RBI flagged serious issues with the bank’s governance and compliance:
Failure to meet licensing conditions
Conduct of management seen as harmful to depositors
Overall functioning deemed against public interest
According to its FY25 annual report:
Vijay Shekhar Sharma holds a 51 percent stake
One97 Communications holds the remaining 49 percent
In an attempt to address concerns:
Vijay Shekhar Sharma stepped down as part-time non-executive chairman in February 2024
One97 withdrew its board nominee
Veteran banker S Sridhar was appointed non-executive chairman
The board currently has six members, including MD & CEO Arun Kumar Bansal.
Historically, troubled banks in India have been rescued through mergers or restructuring—such as Yes Bank in 2020.
However, in this case:
No reconstruction or merger was pursued
RBI opted for complete exit via winding up
The development also highlights challenges in the payments bank ecosystem:
RBI had issued 11 in-principle licences in 2015
Only six payments banks remain operational today
Some players exited early or surrendered licences
Fino Payments Bank has received approval to transition into a small finance bank
August 2015: RBI grants licence
May 2017: Operations begin
March 2022: Onboarding of new customers stopped
January–February 2024: Business restrictions imposed
April 2026: Licence cancelled
The cancellation underscores the RBI’s increasingly strict stance on governance, compliance, and depositor protection in India’s banking system.
