RBI Restrictions Prompt Resignation of Paytm Payments Bank's Director, Manju Agarwal: Sources

Amid regulatory constraints, Manju Agarwal, an independent director at Paytm Payments Bank, resigned following RBI's directives. The bank, affiliated with One97 Communications Limited, has a history of regulatory scrutiny, including penalties and compliance issues. RBI's recent penalties highlight ongoing challenges in compliance and governance.

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In a recent development, sources revealed that Manju Agarwal, an independent director at Paytm Payments Bank, has resigned from her position on the board in response to regulatory curbs imposed by the Reserve Bank of India (RBI). This decision follows RBI's order restricting certain operations of the bank, including the acceptance of deposits and top-ups in various customer accounts and instruments after February 29.

Paytm Payments Bank, associated with One97 Communications Limited, has encountered regulatory challenges in the past. In 2018, RBI prohibited the bank from opening new accounts and wallets due to supervisory concerns, which were later lifted. However, subsequent issues persisted, including failures in monitoring account activity and non-compliance with KYC provisions.

Further scrutiny from RBI occurred when Paytm Payments Services Ltd (PPSL) faced rejection for operating as a payment aggregator in November 2022. RBI instructed PPSL to re-submit applications within 120 days after government approval for investment by OCL into PPSL, adhering to FDI guidelines. Despite an extension granted by RBI, new merchant onboarding remained restricted.

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Penalties were imposed on Paytm Payments Bank, including a Rs 1 crore fine in October 2021 for contravening the Payment and Settlement Systems Act, 2007, and a Rs 5.93 crore penalty in October 2023 for various non-compliances. These included failure to identify beneficial owners, inadequate monitoring of payout transactions, and cybersecurity lapses.

RBI's findings also highlighted shortcomings in Paytm Payments Bank's customer identification process infrastructure, particularly regarding device binding control measures. These lapses raise concerns about the bank's compliance framework and its ability to address regulatory requirements effectively.