Delhi High Court orders winding up of Paytm Payments Bank

The Delhi High Court has ordered Paytm Payments Bank (PPBL) to completely cease its operations and proceed with liquidation. This order comes after the Reserve Bank of India (RBI) took significant action in April, resulting in the cancellation of the bank's license.

The High Court has appointed Girikumar M. Nari, former MD and CEO of SBI Payment Services, as the official liquidator to oversee the winding-up process. The bank's license was revoked in April, approximately two years after the RBI first directed it to stop accepting new deposits or adding funds to existing accounts, wallets, and prepaid instruments.

At the time of the license cancellation, the central bank stated that the bank had sufficient liquidity to repay all depositors during the winding-up process and that the action would not adversely affect customer interests. The RBI itself had initiated proceedings in the Delhi High Court to commence the wind-down process.

Reasons cited by the RBI for its actions included persistent non-compliance with regulations, significant deficiencies in Know Your Customer (KYC) norms, and poor internal governance, which posed risks to depositors. The RBI had previously, in March 2022, barred Paytm Payments Bank from onboarding new customers. In early 2024, it further prohibited the bank from accepting fresh deposits or allowing fund additions, effectively halting its banking operations.

Following these regulatory curbs, Paytm has migrated its core digital payments business away from the payments bank. The company now offers UPI services through partner banks, including Axis Bank, HDFC Bank, and SBI. Paytm is also in the process of applying for a prepaid payment instrument (PPI) license to relaunch its wallet business.