Paytm Payments Bank was barred from taking on new customers by RBI because it violated rules by allowing data to flow to servers abroad and didn’t properly verify its customers, Bloomberg has reported.
Annual inspections by the Reserve Bank of India (RBI) found that the company’s servers were sharing information with China-based entities that indirectly own a stake in Paytm Payments Bank, Bloomberg quoted a person privy to the matter.
The central bank Friday barred SoftBank-backed Paytm Payments Bank from adding new customers, citing "material supervisory concerns observed in the bank."
The bank has also been directed to appoint an audit firm to conduct a comprehensive audit of its IT system, the Reserve Bank of India said in a statement.
Paytm Payments Bank, however, termed the report as "completely false, inaccurate and unverified," adding that it is fully compliant with RBI’s directions on data localisation.
"All of the Bank’s data resides within the country. We are true believers of the Digital India initiative, and remain committed to driving financial inclusion in the country,” the statement said.
The Bank (Paytm Payments) is taking immediate steps regarding the RBI’s decision. PPBL remains committed to working with the regulator to address their concerns as quickly as possible, it said.
It also clarified that the services will not be affected for the customers.
"PPBL’s existing customers can continue to enjoy the benefits of seamless banking and digital payments services without interruption," the statement said.
The savings of existing users in their PPBL account, their fixed deposits with partnered banks and the balance maintained in their Paytm Wallet, FASTag or Wallet Card and UPI services are completely safe and functional, it said.