In the case of HDFC Bank, the lender was allowed to function its other services, but Paytm Payments Bank has been asked to stop onboarding of new customers altogether, which will have a significant impact on the fintech major’s growth plans. According to experts, RBI’s move to bar Paytm Payments Bank from onboarding new customers could be due to several reasons including violation in following norms related to Know Your Customer (KYC), data storage, data privacy and outsourcing of data, among others.
Against this backdrop, Yogesh Pirthani, Partner at Economic Laws Practice (ELP) has been quoted by moneycontrol.com in their article titled ‘Why did RBI bar Paytm Payments Bank from onboarding new customers?’ He said the RBI has vast powers under section 35A of the Banking Regulation Act, 1949 to impose restrictions on a banking company. Yogesh believes the RBI must have sought Paytm Payments Bank’s response on IT-related discrepancies and upon unsatisfactory response from the latter, the central bank must have taken such an action.
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