Paytm Payments Bank gets RBI approval to operate as scheduled bank

Paytm Payments Bank, an associate entity of Paytm, on Thursday said it has received the banking regulator’s approval to operate as a scheduled payments bank, helping it to expand its financial services operations.

In a statement, the bank said it has been included in the second schedule to the Reserve Bank of India (RBI) Act, 1934. After the announcement, Paytm’s share price rose 2.62 per cent to close at Rs 1,594.55 apiece. Since listing, Paytm’s share price has come under immense pressure.

Interestingly, the RBI issued a notification on October 7, saying Paytm Payments Bank has been included in the second schedule. The same has been published in the Gazette of India, dated October 2–8.

With the scheduled bank status, the payments bank can now participate in government- and other large corporations-issued requests for proposal, primary auctions, fixed-rate and variable rate repos, and reverse repos, along with participation in marginal standing facility. Also, the bank will now be eligible to partner in the government’s financial inclusion scheme.

It now becomes eligible for refinancing facility from the RBI at the bank rate, acquires membership to the clearing house, and gets access to currency storage facility.

Apart from Paytm Payments Bank, Fino Payments Bank and India Post Payments Bank have also been included in the second schedule. According to the RBI Act, 1934, banks satisfying the RBI that their affairs are not being conducted in a manner detrimental to the interests of their depositors are included in the second schedule.

Experts said a year after commencing operations as a bank, the regulator undertakes a supervisory assessment. If the affairs are found to be in order, the banking entity is allowed to apply for it to be included in the second schedule list. It is not an automatic upgrade. The regulator has to be satisfied first. It then advises the government to include the bank in the second schedule, after which the government issues a gazette, and the bank is included in the second schedule.

“We have witnessed fast adoption of digital banking services, with users appreciating the new era of banking in India. The inclusion of Paytm Payments Bank in the second schedule to the RBI Act, 1934, will help us innovate further and bring more financial services and products to the underserved and the unserved,” said Satish Kumar Gupta, managing director and chief executive officer, Paytm Payments Bank.

Paytm Payments Bank has 64 million savings accounts as of March 31 and over Rs 5,200 crore in deposits. It is also the largest Unified Payments Interface beneficiary bank, with the lowest technical decline rate among beneficiary and remitter banks.