Reserve Bank of India(RBI) places additional curbs on Paytm Payments Bank(PPB)

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PPB will not take fresh deposits in any customer accounts, prepaid instruments, wallets, FASTags etc., after February 29, 2024.
RBI exercised its powers under section 35A of the Banking Regulation Act of 1949.
- RBI has taken action due to persistent non-compliance observed by external auditors and material supervisory concerns in the PPB.
- RBI has broad powers to issue direction in the public interest or in the interest of banking policy under the act.

Payment banks: The Nachiket Mor committee suggested the introduction of specialised banks or ‘payments banks’ with the objective of financial inclusion.
- They have to register as a Public Limited Company and obtain a license as per the Banking Regulation Act 1949.
- They can carry out most banking operations but can’t advance loans or issue credit cards.
- They can take deposits up to 2 lakh, issue debit cards, and provide mobile and internet banking facilities.

Challenges with payment banks
- Lack of avenues for earning of revenue since they cannot lend
- The need for a digital presence demands high investment in digital infrastructure
- Competition from traditional banks offering mobile banking services, unified payments interface, etc.

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