RBI Fines Paytm Payments Bank ₹5.39 Crore for KYC Violations
New Delhi, India: The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹5.39 crore on Paytm Payments Bank for violating KYC (know your customer) norms and other specific regulatory provisions. The penalty was imposed after the RBI conducted a special scrutiny of the bank from a KYC/AML (anti-money laundering) perspective and a comprehensive system audit of the bank.
The RBI found that Paytm Payments Bank had failed to monitor payout transactions and carry out risk profiling of entities availing payout services. It also failed to identify beneficial owners in respect of entities boarded by it for providing payout services. Additionally, the RBI found that the bank breached the regulatory ceiling of ‘end of the day balance’ in certain customer advance accounts and delayed in reporting a cybersecurity incident.
In a statement, the RBI said that the penalty on Paytm Payments Bank was imposed in exercise of powers vested in RBI conferred under the provisions of the Banking Regulation Act, 1949.
The RBI has been taking a tough stance on KYC violations in recent months. In June 2023, the central bank imposed a fine of ₹1 crore on Amazon Pay (India) for violating KYC norms. In July 2023, the RBI imposed a fine of ₹1.3 crore on PhonePe for similar violations.
The RBI has also been issuing guidelines to banks and other financial institutions on KYC compliance. In 2022, the RBI issued a circular asking banks to adopt a risk-based approach to KYC compliance. The circular also asked banks to review their KYC procedures on a regular basis to ensure that they are effective and up-to-date.
The RBI’s focus on KYC compliance is aimed at preventing the use of the financial system for money laundering and other financial crimes. KYC compliance also helps banks and other financial institutions to better understand their customers and their financial needs.
The RBI’s imposition of a fine on Paytm Payments Bank for KYC violations is a significant development. It is a reminder that banks and other financial institutions need to take KYC compliance very seriously. The RBI is likely to continue to take a tough stance on KYC violations in the future.
