1,000 Accounts, 1 PAN: How Paytm's KYC Puzzle Sparked RBI Action

Many Paytm Payments Bank accounts were created without proper identification, leading the Reserve Bank of India to implement strict restrictions on the company, according to sources familiar with the situation.Accounts lacking proper Know-Your-Customer (KYC) measures conducted transactions amounting to crores of rupees on the Paytm Payments Bank platform, raising concerns about potential money laundering. Over 1,000 users were discovered linking the same Permanent Account Number (PAN) to their accounts, and discrepancies in the bank's compliance were identified during verification by both the RBI and auditors. The RBI, alarmed by the possibility of money laundering, has shared its findings with the Enforcement Directorate, the Ministry of Home Affairs, and the Prime Minister's Office.

Should any evidence of illegal activities emerge, the Enforcement Directorate is set to investigate Paytm Payments Bank, as stated by Revenue Secretary Sanjay Malhotra. Regulatory concerns escalated with reports of undisclosed major transactions within the group and associated parties. The RBI's scrutiny also exposed governance loopholes, particularly in the linkage between Paytm Payments Bank and its parent company, One97 Communications Ltd.

Data privacy concerns arose from transactions routed through the parent app of Paytm, prompting the RBI to suspend transactions through Paytm Payments Bank. Although user deposits in savings accounts, wallets, FASTags, and NCMC accounts remain unaffected, the company will need to rely on third-party banks for its operations until February 29.

After the RBI's notice, Paytm's stock witnessed a significant drop, plunging by 36% in a span of two days and erasing $2 billion from its market value.Earlier, Paytm founder Vijay Shekhar Sharma downplayed the regulatory actions, referring to them as a "speed bump" in an attempt to reassure stakeholders amidst the ongoing turbulence.