The Reserve Bank of India (RBI) has cancelled the banking licence of Paytm Payments Bank (PB), citing that the conduct of founder Vijay Shekhar Sharma and the entity owned by One97 Communications was detrimental to depositors’ interests.
The action was taken under Section 22(4) of the Banking Regulation Act, 1949, and is effective from the close of business on April 24, 2026.
With this decision, Paytm PB is prohibited from conducting the business of ‘banking’ under the law. The RBI will apply to the High Court for its winding up.
Such a decision, a first in recent times, comes after the bank was not allowed to onboard new customers since 2022 and was barred from deposit or credit transactions two years ago.
“The affairs of the bank were conducted in a manner detrimental to the interest of the bank and its depositors,” the RBI said in a statement. “The general character of the management of the bank is prejudicial to the interest of depositors as also the public interest,” it said.
Sources said the regulator had to make a decision one way or the other. The bank was not allowed to onboard customers, nor was it allowed to undertake deposit or credit transactions. Under such circumstances, cancelling the licence was the only option.
In an exchange filing, Paytm said the cancellation of the payments bank licence did not have any financial impact on the company.
“As previously disclosed on March 1, 2024, the company does not have any exposure to PPBL (Paytm Payments Bank Ltd) or any material business arrangements with PPBL. No services provided by the company are in partnership with PPBL,” the company said in a statement.
It added that Paytm PB operates independently, with no board or management involvement from the Company.
“There is no direct financial impact on the company, since, as previously disclosed, the company had already impaired its investment in PPBL as of March 31, 2024,” it said, adding that its services such as UPI payments, soundbox, and card machines payment gateway continued to function normally.
The RBI further noted that allowing the bank to continue would serve no useful purpose or public interest, and that the entity failed to comply with the conditions stipulated in the payments bank licence issued to it.
Importantly, the central bank clarified that Paytm PB has enough liquidity to repay its entire deposit liability upon winding up.
As of March 31, 2025, the bank held customer deposits of ₹1,395.22 crore across wallets, current and savings accounts, and total gift instruments of ₹33.13 crore.
In March 2022, Paytm PB was disallowed from onboarding new customers. Then, from February 29, 2024, the bank was barred from any deposit or credit transactions in any customer accounts. Withdrawal or utilisation of balances by its customers from their accounts, including savings bank accounts, was permitted without restrictions, up to their available balance.
In February 2024, OCL withdrew its nominee from the Paytm PB board, and Vijay Shekhar Sharma stepped down as part-time non-executive chairman and board member. Veteran banker S Sridhar was appointed as non-executive chairman. At present, the Paytm Payments Bank board has six members, including MD & CEO Arun Kumar Bansal.
According to Paytm Payments Bank’s FY25 annual report, Vijay Shekhar Sharma has a 51 per cent stake, and listed One97 Communications has a 49 per cent stake.
In the past, many banks were in trouble, but they were merged with other banks or were reconstructed, as was the case with Yes Bank in 2020.
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