The Reserve Bank of India on Wednesday restricted Paytm Payments Bank Ltd from fresh deposits and credit transactions across its services, due to supervisory concerns.
An audit report revealed "persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action," the central bank said in a release, without disclosing details of the concerns.
The RBI did not specify any timeline for reviewing the imposed restrictions.
Paytm Payments Bank is an associate of listed entity One 97 Communications Ltd, which holds a 49% stake in the unit. A payments bank is allowed to take small deposits up to 200,000 Indian rupees. These entities are not allowed to lend directly, but can facilitate and sell loan products.
Paytm Payments Bank will not be allowed to take further deposits in any customer accounts after Feb. 29, and no credit transactions will be allowed either, including via wallets, the RBI said.
The withdrawal or utilisation of balances by its customers will be permitted without restrictions, the central bank said.
The bank will also not be allowed to offer fund transfers, including via India's popular Unified Payment Interface, the RBI said.
The nodal accounts of One97 Communications Ltd and Paytm Payments Services are to be terminated at the earliest and not later than Feb. 29.
The actions taken by the RBI are under a provision of banking regulations that allow the regulator to give directions to a bank in the interest of depositors.
Paytm did not immediately respond to a Reuters request for comment.