The Reserve Bank of India on Friday, 11 March, barred Paytm Payments Bank from taking on new customers with immediate effect, in a stricture under the Section 35A of the Banking Regulation Act.
In a statement on its website, the regulator said that the move came after some material supervisory issues at the payments bank.
“Reserve Bank of India has today, in exercise of its powers, inter alia, under section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank Ltd to stop, with immediate effect, onboarding of new customers,” it read.
As per Section 35A, the RBI can direct a banking company to stop its affairs, in case its is doing something detrimental to the interest of depositors.
"The bank has also been directed to appoint an IT audit firm to conduct a comprehensive system audit of its IT system," the statement added further.
After a review by IT auditor's report, the onboarding new customers will now be subject to specific permissions by the RBI, BloombergQuint reported.
Paytm Payments Bank was granted a banking licence in May 2017.
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