With less than a fortnight to go for Paytm Payments Bank to wind down its operations, highly placed sources in the banking circles say the bank could be the first significant instance in over two decades where the Reserve Bank of India may not hesitate to take a drastic step such as cancellation of its bank license. “If that be the case, an administrator could be appointed at the bank to oversee certain critical aspects,” said a person with knowledge of the matter.

Failed transactions

A move of this nature is likely after three–four instances of failed due diligence done on Paytm Payments Bank in a bid to take over its business. Being a deposit-taking entity, it is learnt that a few large banks, including a rival payments bank, are interested in Paytm’s wallet business and have shown interest in taking over Paytm Payments Bank. “However, with reports of inadequate KYC compliance looming over the bank, the interested parties stepped back,” said a banker aware of the matter.

According to a few more sources, the regulator had sounded off the interested entities acquiring Paytm Payments Bank as they would be at their own risk and no dispensation on the compliance front would be extended to them. “This was a deterrent for any transaction to go through,” said the person quoted above.

It may be noted that on February 26, the board of Paytm Payments Bank was reconstituted with new members and Vijay Shekar Sharma stepped down as the chairman of the bank. Subsequently, One97 Communications (OCL) terminated all its contracts with the bank. Sharma holds 51 per cent equity in Paytm Payments Bank, while the rest is held by OCL.

Next steps

Another banker added that, with the RBI explicitly mentioning in the FAQ dated February 16 that no credits can be made to Paytm Payment Bank’s savings account and no fresh deposits with partner banks through Paytm Payments Bank will be allowed after March 15, 2024, indicates that the bank is unlikely to be in existence for long.

• Also read: Paytm board approves discontinuation of inter-company agreements with Paytm Payments Bank

However, for depositors who may not have withdrawn or closed their accounts with the bank within the slated timelines, their sums will be transferred to ‘unclaimed deposits’ account under the “Depositor Education and Awareness” (DEA) Fund Scheme, 2014. The role of the administrator would be to ensure that any deposit claims made thereafter is satisfactory repaid to the depositors. As of March 31, 2023, Paytm Payments Bank held ₹3,285.27 crore of deposits, with ₹2,955.96 crore of deposits with 1–3 year maturity.

License revocation likely

Paytm Payments Bank faced with risk of license revocation after March 15

Move likely as talks with 3 – 4 large banks for takeover fail

Inadequate compliance by Paytm Payments Bank seen as reasons for failed takeover talks

RBI may appoint an administrator to oversee unclaimed deposits after March 15

Vijay Shekhar Sharma holds 51 per cent stake in Paytm Payments Bank; rest with One97 Communication