RBI Strips Paytm Payments Bank of Scheduled Status Following Licence Revocation

The Reserve Bank of India has formally excluded Paytm Payments Bank Limited from the Second Schedule of the RBI Act following the earlier cancellation of its licence.

The central banking authority has formally removed Paytm Payments Bank Limited (PPBL) from its recognized roster of scheduled commercial institutions. According to information made public on Wednesday, the step follows the definitive revocation of the entity's banking authorization. The regulator had revoked the banking licence of PPBL in April this year on grounds of persistent non-compliance with statutory norms and governance standards.

Licence Cancelled in April Preceded Court Winding-Up Directive
On April 24 of this year, the central banking regulator issued a public notification confirming that the institution's operating licence stood cancelled. In its regulatory determination, the authority emphasized that the ongoing operations of the payment bank were being conducted in a manner detrimental to broader financial interests. Following that regulatory intervention, the Delhi High Court ordered the complete winding up and closure of Paytm Payments Bank Limited.

Gazette Notification Confirms Statutory De-Listing
The Reserve Bank stated that Paytm Payments Bank Limited has been removed from the Second Schedule of the Reserve Bank of India Act, 1934. The formal notification regarding this regulatory exclusion was executed on July 31, and it was subsequently published in the Gazette of India during the month of September. This gazette notification legally finalizes the termination of the bank's scheduled entity credentials.

Operational Significance of the RBI Second Schedule
The Second Schedule of the Reserve Bank of India Act comprises only those accredited banking institutions that consistently satisfy the strict prudential requirements and statutory capital thresholds set by the central regulator. Entities accorded this status are recognized as scheduled banks, which entitles them to specific liquidity facilities, operational accommodations, and clearing house privileges. Removal from this schedule marks the total forfeiture of these central banking accommodations and statutory recognitions.

History of Repeated Regulatory Interventions
The payments bank entity, owned by the fintech group One97 Communications, had repeatedly run afoul of regulatory oversight over the past several years. In March 2022, the supervisory authority prohibited the institution from onboarding fresh customers while mandating the appointment of an independent IT firm to conduct an extensive audit of its systems. Regulatory restrictions were tightened further on January 31, 2024, and February 16, 2024, barring the firm from accepting any fresh credit, deposits, or wallet top-ups across existing user accounts and prepaid instruments.

What this means for you
The formal de-listing of Paytm Payments Bank ends its scheduled status and legally completes its exit from the regulated Indian banking network.

• For Retail Consumers: All fresh deposits, credit additions, and wallet top-ups were already halted under earlier directives. Users with pending settlement claims must now rely strictly on winding-up procedures overseen through legal channels.
• For Fintech Companies: The finality of this action highlights the uncompromising necessity of full regulatory adherence for digital lenders and payment firms. Market participants are accelerating internal compliance audits to avoid severe licensing penalties.
• For Investors and Shareholders: The formal removal of scheduled status provides definitive regulatory closure regarding the bank entity. Stakeholders are tracking how the parent entity continues third-party payment distribution without a captive banking arm.
• For Systemic Confidence: The supervisory authority has demonstrated that prudential norms apply strictly irrespective of market size. This reinforces deposit safety and oversight integrity throughout the broader financial ecosystem.

Why this happened
The statutory de-listing was triggered by the formal revocation of the entity's banking licence following persistent non-compliance and detrimental business operations.

• Persistent Non-Compliance: The entity consistently failed to align with regulatory standards and governance directions. The supervisory authority determined that the bank's ongoing operations posed significant financial risks.
• Escalating Supervisory Restrictions: Onboarding freezes imposed in March 2022 and stringent deposit restrictions enacted in early 2024 culminated in licence cancellation. Consequently, the Delhi High Court directed the complete winding up of the organization.
• Statutory Deregistration: Once operating credentials were lost, the regulator issued a notification on July 31 to de-list the firm under the RBI Act. The formal gazette publication in September officially enacted the exclusion.

Questions & Answers

1. Which list has the RBI removed Paytm Payments Bank from?
The RBI has formally removed Paytm Payments Bank Limited from the Second Schedule of the Reserve Bank of India Act, 1934.

2. When was the banking licence of Paytm Payments Bank cancelled?
The central bank announced the cancellation of the bank's licence via an official press release on April 24.

3. When were the formal notification and gazette publication issued?
The notification was executed on July 31, followed by its publication in the Gazette of India in September.

4. What is the significance of the RBI's Second Schedule?
The Second Schedule includes recognized institutions that satisfy central banking criteria and receive specific operational accommodations.

5. What major past restrictions were imposed on the payments bank?
Customer onboarding was halted in March 2022, and directives in January and February 2024 barred further deposits and wallet top-ups.

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