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On Thursday, the Reserve Bank of India penalized Paytm Payments Bank guidelines, among others. The penalty has been imposed by the RBI with a monetary fine of ₹5.39 crore due to their failure to adhere to specific regulations concerning KYC (Know Your Customer) and cybersecurity authority granted under Section 47A(1)(c) along with Section 46(4)(i) of the Banking Regulation Act, 1949.
This enforcement action has been taken in response to the bank’s failure to meet regulatory requirements. It is not intended to pass judgment on the validity of any transactions or agreements the bank has with its customers. Furthermore, the central bank identified instances of non-compliance with various regulations, including those pertaining to ‘RBI Guidelines for Payments Bank Licensing,’ ‘Cybersecurity Framework in Banks,’ and ‘Securing Mobile Banking Apps,’ which also encompass the UPI ecosystem.
🚨 RBI imposes Rs 5.39 crore fine on Paytm Payments Bank
The fine has been imposed because Paytm did not complete proper KYC for companies using its services and also delayed reporting of a cyber security incident pic.twitter.com/Xoc61xOD5b
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The RBI emphasized that this measure is a result of the bank’s failure to meet regulatory compliance standards and is not meant to pass judgment on the legitimacy of any transactions or agreements between the bank and its customers.
Why did this happen?
According to the RBI, they conducted a thorough review focused on KYC (Know Your Customer) and AML (Anti-Money Laundering) aspects of the bank, along with a comprehensive audit of the bank’s systems. The assessment of these reports and related communications uncovered instances of non-compliance.
There are some guidelines of the Reserve Bank regarding Payments Bank. These include increasing the maximum balance at the end of the day, cyber security framework in the bank, guidelines on reporting unusual cyber security incidents, and securing the mobile banking application with the UPI ecosystem.
The RBI’s examination found that Paytm Payments Bank did not correctly identify the beneficial owner for entities that had been onboarded for payout services. Additionally, the bank failed to monitor payout transactions and conduct risk assessments for the entities using payout services.