EPFO to block credits, deposits into EPF accounts linked with Paytm Payments Bank from Feb 23

Paytm crisis: Following the Reserve Bank of India curbs, the Employees’ Provident Fund Organisation (EPFO) has said it will restrict deposits and credit transactions of subscriber’s EPF accounts in Paytm Payments Bank accounts.

The EPFO, in a circular on February 8, 2024, asked its Field Offices not to accept claims associated with bank accounts in Paytm Payment Bank Limited (PPBL) with effect from February 23, 2024.

Last year, the EPFO had directed its banking section to allow EPF payments to be made in Paytm Payment Bankand Airtel Payments Bank accounts.

On January 31, the RBI issued curbs on Paytm Payments Bank and said no deposit, credit transactions or top-ups will be allowed in any customer accounts, prepaid instruments, wallets, FASTags, etc. after February 29.

Paytm Payments Bank commenced operations as a payments bank from May 23, 2017. The central bank issued a licence to the bank under Section 22 (1) of the Banking Regulation Act, 1949, to carry on the business of payments bank in India. Paytm CEO Vijay Shekhar Sharma was one of the 11 applicants who was issued in-principle approval for setting up a payments bank, as announced in the press release on August 19, 2015.

The central bank on Thursday clarified its recent stand against Paytm Payments Bank, stating that the crackdown was a result of the bank's failure to comply with regulations despite repeated warnings. The decision to restrict Paytm Payments Bank from accepting new deposits was made after giving the company ample time to rectify its non-compliance issues, RBI Deputy Governor Swaminathan J said at a press conference after the MPC meeting.

In the same press conference, RBI Governor Shaktikanta Das said that regulated entities are given adequate time to meet regulatory requirements.

He added that as part of rules, the central bank engages in discussions with companies regarding compliance issues and encourages them to take corrective measures. However, when such efforts prove ineffective, the RBI resorts to imposing supervisory or business restrictions.

He added that the RBI is a responsible regulator and would not have taken action if all regulatory norms had been followed.

Das said: "Our focus is always on engaging with regulated entities bilaterally and we nudge them to take corrective action. We give them sufficient time to take corrective action...Without making any specific references to Paytm, I want to make some general comments about all our regulated entities. One, over the last few years, we have significantly deepened our supervisory approach and methods."

"Over the last few days, we have received a lot of queries. We have noted them down. Based on that, we will be issuing an FAQ sometime next week," the RBI Governor said.

Paytm has an expansive network of over 30 million merchants via its platform, with roughly 20 per cent using the services of Paytm Payments Bank Ltd (PPBL) for their financial settlements. The central bank's directive barring new deposits into Paytm Payments Bank has raised concerns about disruptions to digital payments.

Also read: Paytm shares in focus for 4 reasons today