Paytm Forms Advisory Committee Led by Former Regulator Chief Following RBI’s Criticism for Non-Compliance

The board of One97 Communications Ltd, which operates the popular Paytm payments app, has established a committee under the leadership of N. Damodaran, the ex-chairman of India’s securities market watchdog, to provide guidance on compliance and regulatory issues to Paytm Payments Bank Ltd. This move comes in the wake of criticism from the banking regulator over the bank’s consistent failure to adhere to regulatory standards.

Chaired by Damodaran, the advisory committee also includes M.M. Chitale, past president of the Institute of Chartered Accountants of India (ICAI) and former member of the governing council of the Banking Codes and Standards Board of India, as well as R. Ramachandran, ex-Chairman and Managing Director of Andhra Bank. This information was disclosed by One97 Communications to the stock exchanges.

The formation of this advisory panel was initiated following the Reserve Bank of India’s (RBI) imposition of significant operational restrictions on Paytm Payments Bank on January 31, due to the bank’s ongoing failure to meet the prudential norms required by the regulator. The RBI’s action was specifically in response to the bank’s repeated violations concerning the know-your-customer (KYC) norms and anti-money laundering regulations.

One97 Communications, in a statement, affirmed its management’s dedication to pursuing sustainable growth while ensuring compliance with regulatory standards and frameworks.

Relatedly, Alchemy Capital’s CIO has commented that Paytm could develop a profitable business model leveraging customer data.

Concerns Raised by the RBI

The regulatory authority’s investigation uncovered significant lapses in adhering to KYC requirements, thereby putting customers, depositors, and wallet users at substantial risk. Specifically, the investigation revealed instances where a single PAN was linked to over 100 customers, with some instances exceeding 1,000 links. Moreover, the RBI highlighted a concerningly high number of inactive accounts, suggesting the potential use of these accounts for illicit activities. The deficiencies in KYC processes and the absence of an effective transaction monitoring system have also raised flags about possible money laundering activities within the bank.