Paytm will cease operations after February 29 – details on RBI's statement and implications for users in a concise 5-point summary.

RBI has imposed restrictions on Paytm Payments Bank, effective from February 29, prohibiting the onboarding of new users, and restricting debit, credit, and wallet transactions. Alleged persistent non-compliance led to these measures. Paytm Payments Bank has responded by stating its commitment to comply with RBI directives promptly.

Additionally, One97 Communications Limited (OCL), the parent company, will cease collaboration with Paytm Payments Bank and work exclusively with other banks in the future. Paytm anticipates an impact of Rs. 300 to 500 crores on its annual EBITDA due to these developments but expresses the intention to sustain profitability.

For users, this translates to the following changes:

After February 29, new users will be unable to create accounts on Paytm Payments Bank.

Existing users will face restrictions on using Paytm wallets, Paytm Fastags, and Mobility Cards.

Paytm reassures that existing users can still utilize the platform's payment solutions, and offline services will remain available after February 29.

Paytm Payment Gateway for online merchants will continue operating for existing merchants.

OCL's offline merchant payment network, including services like Paytm QR, Paytm Soundbox, and Paytm Card Machine, will continue without disruption, and new offline merchants can still be onboarded.

Paytm Payments Bank will be prohibited from accepting new deposits after February 29. Any funds users wish to add to their Paytm Payments Bank account must be done before the end of February.

 Despite the restrictions, One97 Communications Limited (OCL) assures that certain services such as insurance distribution and loans will remain unaffected. OCL emphasizes that these financial services are independent of Paytm Payments Bank and are expected to continue without disruption.

 Debit and credit transactions, including those through wallets, will not be permitted after February 29. However, customers are allowed unrestricted withdrawals. Although money transfers and bill payments through Paytm services will be prohibited, users can still access and withdraw the existing balance in their Paytm account.

 The Reserve Bank of India mandates that Paytm Payments Bank should cease offering services like fund transfers, bill payments, and UPI facilities after February 29. This means users won't be able to perform these transactions using Paytm services post that date.

 While the RBI's action primarily targets Paytm's banking operations, it does not explicitly mention the impact on transactions made via external banks. Users may still be able to make UPI payments through Paytm if connected to an external account, though clarity on this aspect is pending an official statement from Paytm.

 Both Paytm Wallet and Paytm UPI services, according to the Paytm app, are powered by Paytm Payments Bank. The RBI's directive also includes terminating all nodal accounts of One97 Communications Ltd and Paytm Payments Services Ltd, indicating restrictions on these entities' transaction capabilities.

 The RBI's decision to impose restrictions on Paytm Payments Bank stems from persistent non-compliances and ongoing supervisory concerns, as outlined in an audit report. Paytm Payments Bank, established in 2017 as a digital banking service, operates as an extension of Paytm and was authorized by the RBI to function as a payments bank.