Delhi HC issues notice to PayTM, RBI on company's postpaid wallet service

Court notice on PIL which alleged PayTM post-paid wallet in contravention of RBI guidelines on payment banks

The Delhi High Court on Monday notices to the Reserve Bank of India (RBI) and PayTM, seeking their response to a Public Interest Litigation (PIL) which claims that the digital payment company is violating the banking rules by operating a post-paid wallet. A division bench led by Chief Justice Rajendra Menon was hearing the PIL which has alleged that though PayTM has a payments bank licence, it is not allowed to facilitate credit disbursement or loan facilities to customers.

PayTM’s post-paid service allows users certain credit limit based on their transactions and allows them to pay back the amount without interest within a period of 30 plus 7 days. This, the petitioner has alleged, is in violation of the Section 1.6 of RBI’s Operating Guidelines for Payments Bank which puts restrictions on loans and advances to customers.

The petitioner also claims that PayTM has not informed RBI about the operation of a post-paid wallet service and thus is also in violation of its rules which mandate informing the regulator about operations of payment banks.

Apart from this, the PIL also alleges that since the post-paid wallet services of the company are managed by a third party vendor named Clix Finance India Private Limited, the information shared by PayTM with it stands in violation of article 21 of the constitution which enshrines privacy as a fundamental right.

“PayTM Payments Bank is deceitfully sharing the personal information of the customers with their authorisation / knowledge to the third party,” the petitioner has alleged.

In June last year, the PayTM Payments Bank Limited was asked to stop adding new customers after an audit by the RBI found glitches in the Know Your Customer process of the bank. Later on December 31, the company was given a go ahead to resume the process after complying with RBI norms and getting a formal go ahead by the regulator. Payments banks can accept deposits from individuals and small businesses up to Rs 1 lakh per account.