Paytm Payments Bank Faces Regulatory Scrutiny Over Improperly Created Accounts
Paytm Payments Bank is under regulatory scrutiny as it has been discovered that thousands of accounts were created without proper identification. Reserve Bank of India (RBI) has brought these irregularities to the attention of the Enforcement Directorate and other government agencies. The accounts in question were found to have major irregularities in Know Your Customer (KYC) procedures, exposing customers, depositors, and wallet holders for matters of serious risks.
As per Reuters, there were cases where the total value of transactions in these improperly created accounts exceeded regulatory limits in minimum KYC (Know Your Customer) pre-paid instruments, raising serious worries about money laundering. In one case, an account linked to a single Permanent Account Number (PAN) was found to be operating more than 1,000 wallets, indicating huge lapses in KYC procedures.
The Enforcement Directorate (ED) has been updated about these irregularities, and Revenue Secretary Sanjay Malhotra said that the ED will investigate Paytm Payments Bank if evidence of illegal activity is uncovered. In response, a spokesperson for Paytm Payments Bank stressed that they operate with the highest ethical standards and neither the bank nor its founder-CEO has been the subject of an investigation by the ED with respect to money laundering.
Due to the regulatory concerns, the RBI has directed Paytm Payments Bank to stop accepting deposits or top-ups in customer accounts, wallets, FASTags, and other instruments after February 29. This directive has led to a huge drop in the shares of One97 Communications Ltd, the parent company of Paytm, with a decline of 36% from January 31st to February 2nd, 2024.
Paytm’s founder and CEO, Vijay Shekhar Sharma, was on social media to assure users, stating that the app would continue to function as usual and expressing gratitude for the ongoing support. But, the situation highlights the challenges faced by financial institutions in ensuring compliance with regulatory requirements, especially in the digital payment sector.