RBI to set audit guidelines for Paytm Payments Bank: Report

The Reserve Bank of India (RBI) will set the audit guidelines for the Paytm Payments Bank after it banned the company from onboarding new customers last week. The Economic Times reports that in the coming days, Paytm Payments Bank will submit a list of third-party auditors for approval. Once the list of potential candidates has been submitted, the central bank will approve the final candidate for audit. It will also finalise the terms of reference based on its findings that include the company not meeting the Know Your Customer (KYC) norms.

“There were consistent deficiencies found in the bank’s KYC process, like accounts that needed a full KYC were not done,’’ the report wrote, citing a source. The same source also told the publication that the data from the Paytm Payments Bank was also flowing to the company’s e-wallet business, which reportedly is against the rules and guidelines set by the central bank. “The payments bank did not plug the gaps in the system even after repeated relevant references by the regulator,” the source added.

The unsatisfactory compliance on part of the Paytm Payments Bank regarding the data of its customers is what led to the RBI prohibiting the company from onboarding new customers last week.

What has happened so far?

Notably, RBI last week, stopped the Paytm Payments Bank to stop on-boarding new customers with immediate effects under the section 35A of the Banking Regulation Act, 1949. “Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing the report of the IT auditors…This action is based on certain material supervisory concerns observed in the bank,” RBI wrote in a release.

“The bank has also been directed to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system,” the bank added.

While RBI didn’t detail the reason behind its move, reports suggest that the company wasn’t verifying its customers properly via the prescribed guidelines, which could lead to fraud. Furthermore, reports suggested that the company was allowing the data to flow through servers in China.

Paytm founder Vijay Shekhar Sharma in an interview with CNBC-TV18 denied any wrong doings. “We have no server that is outside India, and no foreign national has any access to our servers,” he said in the interview.

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