The Reserve Bank of India (RBI) has imposed a ₹5.39-crore monetary penalty on Paytm Payments Bank Ltd (PPBL) for non-compliance with its directions relating to Know Your Customer (KYC), licensing guidelines, enhancement of maximum balance at the end of the day, cyber security framework, and securing mobile banking applications, including UPI ecosystem.

The RBI conducted a special scrutiny of PPBL from KYC/AML (anti-money laundering) perspective. Further, a comprehensive system audit of the bank was conducted by auditors identified by the central bank. The RBI said the examination of the special scrutiny report, comprehensive system audit report and related correspondence pertaining to the same revealed, inter alia, non-compliance with its directions by the bank to the extent it failed to identify beneficial owner in respect of entities onboarded by it for providing payout services, and it did not monitor payout transactions and carry out risk profiling of entities availing payout services.

The RBI, in a statement, said PPBL also breached the regulatory ceiling of end of the day balance in certain customer advance accounts availing payout services and it reported a cyber security incident with delay.

Further, PPBL failed to implement device binding control measure related to ‘SMS delivery receipt check’, and its video-based customer identification process infrastructure failed to prevent connections from IP addresses outside India, it added.

“In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the said directions, as stated therein.

“After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty on the bank,” said the RBI.

This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of the Banking Regulation Act, 1949, ir added.

The central bank underscored that its action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

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