RBI slaps Rs 5.39 crore penalty on Paytm PB for violating series of norms

Paytm PB facing ban on customers addition since Mar '22

The Reserve Bank of India (RBI) on Thursday imposed a monetary penalty of Rs 5.39 crore on Paytm Payments Bank for violating Know Your Customer norms, among others.

RBI said Paytm Payments Bank had failed to meet certain regulatory provisions under Know Your Customer (KYC), as well as the norms on enhancement of maximum balance at the end of the day as indicated in the licensing conditions of payments banks.

The bank was also found non-compliant with the 'Cyber Security Framework in Banks', in the context of 'Guidelines on Reporting of Unusual Cyber Security Incidents' and 'Securing Mobile Banking Applications Including UPI Ecosystem'.

RBI had conducted a special scrutiny from the KYC/Anti-Money Laundering (AML) perspective of the bank. A comprehensive system audit of the bank was also conducted by auditors identified by RBI.

The scrutiny report and the audit revealed that Paytm Payments Bank failed to identify the beneficial owner in respect of entities on-boarded by it for providing payout services. Moreover, it did not monitor payout transactions and carry out risk profiling of entities availing payout services.

RBI said the payments bank breached the regulatory ceiling of the end-of-day balance in certain customer advance accounts availing payout services and reported a cyber security incident with delay.

"It failed to implement device binding control measures related to 'SMS Delivery Receipt Check'; its Video Customer Identification Process (V-CIP) infrastructure failed to prevent connections from IP addresses outside India," RBI said.

Since March 2022, Paytm Payments Bank has been barred by RBI from on-boarding new customers due to supervisory concerns. The bank was directed by the regulator to appoint an IT audit firm to conduct a comprehensive system audit of its IT system.

"On-boarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing the report of the IT auditors," RBI had said in March 2022 while imposing the ban on customer on-boarding.