RBI cancels licence of Paytm Payments Bank, to seek its winding up in court

The Reserve Bank of India cancelled the banking licence of Paytm Payments Bank Limited on Friday, bringing an abrupt end to one of India’s most high-profile payments bank experiments.

In a notification dated April 24, the RBI said the licence stands cancelled with effect from close of business on April 24, 2026, and the bank was immediately barred from carrying out the business of banking.

The central bank also said it will move the High Court for the winding up of the bank.

“RBI will make an application for winding up of the bank before the High Court,” the regulator said in its notification.

The action marks a dramatic escalation in regulatory steps against Paytm Payments Bank, which had already faced severe business restrictions over the past two years.

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Why did the RBI cancel the licence?

The RBI listed multiple reasons for the cancellation of Paytm Payments Bank’s licence. It said the affairs of the bank were conducted in a manner detrimental to the interest of the bank and its depositors. It also said the general character of the management was prejudicial to the interest of depositors and public interest.

The RBI also said that no useful purpose or public interest would be served by allowing the bank to continue. It further said that the bank had failed to comply with conditions stipulated in the payments bank licence, violating provisions of the Banking Regulation Act.

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Restrictions had started earlier

The licence cancellation comes after curbs were imposed by the RBI earlier.

Paytm Payments Bank had been directed to stop onboarding new customers from March 11, 2022.

Later, on January 31, 2024 and February 16, 2024, the RBI imposed further restrictions that barred fresh deposits, credits, and top-ups in existing customer accounts, prepaid instruments, and wallets.

The curbs effectively froze the bank’s growth and significantly reduced its operating scope.

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What happens to depositors?

The RBI has reassured customers on repayment. It said Paytm Payments Bank Limited has enough liquidity to repay its entire deposit liability upon the winding up of the bank. The depositors are expected to be repaid during the winding-up process, subject to regulatory procedures.

The cancellation is a major setback for the Paytm ecosystem, which had built significant customer adoption around wallets, merchant payments, and digital banking services.

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Payments banks were launched to expand financial inclusion by offering deposits and payments services without full lending operations.

With the licence now cancelled, attention will shift to how parent company Paytm reorganises its banking and payments partnerships.