RBI cancels Paytm Payments Bank licence, cites regulatory violations, depositor risks

In a major regulatory action, the Reserve Bank of India (RBI) has cancelled the banking licence of Paytm Payments Bank Limited (PPBL), citing persistent non-compliance with regulatory norms and concerns over depositor interests. The decision, effective April 24, 2026, marks one of the strongest actions taken by the central bank against a payments bank.

According to the RBI’s official order, PPBL is now prohibited from carrying out any banking activities as defined under the Banking Regulation Act, 1949. The central bank has also initiated the process of winding up the bank and will approach the High Court for further proceedings.

"The Reserve Bank of India (RBI) has, vide order dated April 24, 2026, cancelled the banking licence issued to Paytm Payments Bank Limited under Section 22(4) of the Banking Regulation Act, 1949 (BR Act) effective from close of business on April 24, 2026.

"Consequently, Paytm Payments Bank Limited is prohibited from conducting the business of ‘banking’ as defined in Section 5(b) or any additional business specified under Section 6 of the Banking Regulation Act, 1949, with immediate effect. RBI will make an application for winding up of the bank before the High Court," said RBI in a statement.

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Regulatory concerns and violations

The RBI outlined multiple reasons for revoking the licence, highlighting that the bank’s operations were conducted in a manner “detrimental to the interest of the bank and its depositors”, It also pointed to deficiencies in management practices, stating that the overall functioning of the bank was prejudicial to public interest.

Further, the regulator noted that allowing the bank to continue operations would serve no meaningful public purpose. The bank was also found to be in violation of conditions stipulated under its payments bank licence, including key provisions of the Banking Regulation Act.

Background of restrictions

This action follows a series of regulatory measures imposed on PPBL over the past few years. In March 2022, the RBI had directed the bank to stop onboarding new customers. Subsequently, in early 2024, additional restrictions were placed, including a ban on accepting fresh deposits, credits, or top-ups in customer accounts, wallets, and prepaid instruments.

These measures had already curtailed the bank’s operations significantly, signalling escalating regulatory concerns well before the licence cancellation.

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Depositor protection and liquidity assurance

Despite the cancellation, the RBI stated that Paytm Payments Bank currently holds sufficient liquidity to repay all its deposit liabilities. This assurance is aimed at protecting depositors and ensuring an orderly resolution process.

The winding-up process will now determine the timeline and mechanism for returning customer funds, under the supervision of the judiciary.