The functioning of Paytm Payments Bank has been completely stopped from today, 24th April. The Reserve Bank of India (RBI) has canceled the banking license of Paytm Payments Bank Limited (PPBL) with immediate effect. RBI said that, given the way the bank was functioning, customers’ money was not safe. However, the UPI app will continue to work as before. RBI has assured that Paytm Payments Bank has sufficient liquidity to return all the deposits of customers during the bank closure process. This means that there is no possibility of depositors losing money.
RBI has given four reasons for canceling the license:
**Harm to customers:** The way the bank was operating meant that money deposited by customers was not safe.
**Management Negligence:** The attitude of the officers managing the bank and their decisions were not in the best interests of the general public or the account holders.
**No public interest:** The Reserve Bank decided that there would be no public benefit in allowing the bank to continue; Instead, it will only increase the risks.
**Breach of conditions:** The bank consistently violated the commitments and regulatory norms (such as compliance with KYC norms and proper use of funds) that it had agreed to while obtaining the license.
Understand in 4 main questions what effect this will have on users.
1. What is Payments Bank?
**Answer:** Payments Bank works like a traditional bank (like SBI or PNB), but does not have any physical branch. All banking activities—like opening an account, depositing money, and making transactions—are done entirely through the mobile app. However, there is a limit on the maximum amount that can be maintained in a Payments Bank (or wallet) account, which is fixed at ₹200,000. Furthermore, such banks are prohibited from issuing any kind of loan or credit card; Non-resident Indians (NRIs) cannot open accounts in these; And they are not allowed to invest your money. They are required to keep most of their capital safely invested in government bonds.
2. I use Paytm app;** **Will my UPI services stop working now?
**Answer:** If your Paytm app is linked to another bank account—like SBI, HDFC, or ICICI—then your UPI services will continue to work as before. Paytm is now working as a ‘third-party app’ like Google Pay and PhonePe. To make this possible, the company has partnered with banks like Axis, HDFC, and SBI. This means that UPI transactions will continue, but Paytm Payments Bank will no longer act as their banking partner.
3. What if a user’s UPI is directly linked to ‘Paytm Payments Bank’?
**Answer:** RBI had banned new deposits and transactions through @paytm handle (which is linked to Paytm Payments Bank) in 2024 itself. With the license cancelled, Paytm’s hopes of resuming these operations are now completely dashed. If a user still has money left in their Paytm Wallet, they can transfer it to their bank account.
**What to do:** You have to go to Paytm app and link your other bank account as your primary account. After doing this, you will be able to make UPI payments again.
4. What impact will this have on Paytm and the digital payment ecosystem?
**Answer:** Due to RBI’s decision, Paytm will no longer be able to run banking operations alone; He will have to depend on other banks. This may further increase the dominance of PhonePe and Google Pay in the UPI market. For other fintech companies, this is a stark warning that ignoring the rules will come at a heavy cost, and regulatory scrutiny is about to get even more stringent.
Paytm shares fell 0.5%
On Friday, shares of Paytm’s parent company, ‘One97 Communications’ saw a decline in the stock market. Shares of Paytm closed 0.5% lower at ₹1,153 per share. The news related to cancellation of banking license is likely to have an even greater impact on the stock in the coming days. Paytm Payments Bank was under the radar of RBI since 2022.
The Reserve Bank’s strict attitude towards Paytm Payments Bank has been going on for a long time. It started in March 2022, when RBI had stopped the bank from adding new customers. Subsequently, in January 2024, the bank was barred from accepting new deposits due to regulatory violations and deficiencies in customer due diligence (KYC) processes. Since then, the bank’s activities have been limited to a limited number of functions, such as providing withdrawals from existing deposits and referrals for loans.
Got license in 2015; support of big investors
Paytm Payments Bank was granted a limited banking license in August 2015. Under this license, the bank was allowed to accept small deposits, but did not have the right to make loans directly. The bank was backed by One97 Communications, whose investors include many big names. Major players like China’s ‘Ant Group’ and Japan’s ‘SoftBank’.
