India’s central bank cancels Paytm Payments Bank licence
The licence cancellation puts the spotlight on the dwindling significance of payment banks in the banking system
Published Sat, Apr 25, 2026 · 03:20 PM
[BENGALURU] India’s central bank said on Friday (Apr 24) that it has cancelled the banking licence issued to Paytm Payments Bank Limited, more than two years after the regulator imposed business curbs over violations, including lapses in customer due diligence.
Backed by One 97 Communications, which once counted China’s Ant Group and Japan’s SoftBank as investors, Paytm had obtained a limited banking license in August 2015 that allowed it to take small deposits but not give out loans.
In January 2024, the Reserve Bank of India (RBI) ordered the bank to stop accepting fresh deposits due to what it said at the time was non-compliance with rules, including around customer due diligence, use of funds and technology infrastructure.
While the bank remained operational, its activities were severely limited to processing withdrawals of existing deposits and facilitating loan referrals through banking correspondents, according to its website.
After the cancellation, One 97 will no longer be able to hold any deposit-taking businesses. The firm currently holds 51 per cent of the total shareholding in Paytm Payments Bank, with the remaining held by founder Vijay Shekhar Sharma.
The RBI said on Friday that it would make an application for winding up of the bank before the high court.
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“The affairs of the bank were conducted in a manner detrimental to the interest of the bank and its depositors,” the RBI said. “The general character of the management of the bank is prejudicial to the interest of depositors as also the public interest.”
“No useful purpose or public interest would be served by allowing the bank to continue,” it said.
Paytm clarified that the cancellation of the bank’s licence will not have any financial impact on the company.
“The company does not have any exposure to PPBL or any material business arrangements with PPBL. No services provided by the company are in partnership with PPBL. Additionally, PPBL operates independently, with no board or management involvement from the company,” Paytm said in a notice to the exchanges on Friday.
“Cancellation better than merger”
In February, officials at the central bank held an internal meeting to discuss the possibility of cancelling the bank’s licence, said two sources with direct knowledge of the matter.
Airtel Payments Bank, backed by India’s second-largest telecommunications firm Bharti Airtel, had also informally expressed interest in taking over Paytm Payments Bank last year, but the talks did not progress, they said.
The sources requested anonymity as they were not authorised to speak to the media.
The RBI and Airtel Payments Bank did not immediately respond to Reuters’ requests for comment.
The central bank believed cancelling the bank’s licence was a better option than merging it with another entity, one of the sources said.
Financial impact
The licence cancellation, the first such action taken by the regulator against a specialised lender, puts the spotlight on the dwindling significance of payment banks in the banking system.
Indian regulators conceptualised payment banks in 2014 to facilitate small deposits and cash transfers, but the banks lost their relevance after real-time digital transfers via the now commonly used Unified Payment Interface soared.
While business dwindled, compliance costs rose as the regulator feared small deposit accounts could be misused and asked these banks to tighten monitoring.
As at March 2025, Paytm Payments Bank held total deposits of 13.95 billion rupees (S$189 million) across wallet, current, and savings accounts. It reported a net loss of 946.4 million rupees, according to its fiscal 2025 annual report.
Its capital adequacy ratio currently stands between 135 per cent and 152 per cent, well above the regulatory requirement of 15 per cent.
One 97 had hoped the central bank would lift restrictions to resume its most profitable wallet business, which it had transferred to the payments bank unit as part of RBI restrictions.
“…As a promise, we will bring the wallet business back home,” Sharma had said in the third-quarter earnings call on Jan 30. REUTERS
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