RBI Cancels Paytm Payments Bank Licence, Files for Winding Up Before High Court
The Reserve Bank of India (RBI) has cancelled the banking licence of Paytm Payments Bank Limited, marking the first time the central bank has taken such an action against a specialised payments lender. The move brings to a close a regulatory saga that began in January 2024, when the RBI ordered the bank to stop accepting fresh deposits over non-compliance concerns including lapses in customer due diligence.
Background: A Long Road to Cancellation
Paytm Payments Bank, backed by One 97 Communications, had originally obtained a limited banking licence in August 2015, which permitted it to accept small deposits but not extend loans. The bank had once counted China's Ant Group and Japan's SoftBank among the investors in its parent company.
Regulatory trouble escalated in January 2024, when the RBI ordered Paytm Payments Bank to stop accepting new deposits, citing non-compliance with rules around customer due diligence, use of funds, and technology infrastructure. While the bank technically remained operational after that order, its activities were reduced to processing withdrawals from existing deposits and facilitating loan referrals through banking correspondents.
Reports in February 2026 indicated that RBI officials had held internal meetings to discuss the possibility of formally cancelling the licence, with the central bank ultimately concluding that cancellation was a preferable outcome to a merger with another entity. Airtel Payments Bank had informally expressed interest in acquiring Paytm Payments Bank last year, but those discussions did not progress.
RBI's Rationale for the Cancellation
In its statement on Friday, April 24, the RBI was unequivocal about its reasoning. The central bank stated that the affairs of the bank had been conducted in a manner detrimental to the interests of both the bank and its depositors, and that the general character of its management was prejudicial to depositor and public interest. The RBI added that no useful purpose or public interest would be served by allowing the bank to continue operations.
Following the cancellation, the RBI said it would make an application before the High Court for the winding up of Paytm Payments Bank.
Financial Position of the Bank at Closure
As of March 2025, Paytm Payments Bank held total deposits of approximately Rs 1,395 crore ($149.58 million) across wallet, current, and savings accounts. The bank reported a net loss of Rs 94.64 crore in FY2024-25. Its capital adequacy ratio stood between 135% and 152%, well above the regulatory minimum of 15%, meaning the bank remained technically well-capitalised despite its operational difficulties.
Impact on One 97 Communications (Paytm)
One 97 Communications, which holds a 51% stake in Paytm Payments Bank (with the remaining 49% held by founder Vijay Shekhar Sharma), moved quickly to reassure investors about the impact of the cancellation.
Paytm clarified in a notice to stock exchanges that the licence cancellation will have no financial impact on the company. The company stated that it has no exposure to Paytm Payments Bank, no material business arrangements with the entity, and that none of its services are offered in partnership with the bank. Paytm further noted that the bank operates independently, with no board or management involvement from the parent company.
However, the cancellation effectively extinguishes One 97's ability to hold any deposit-taking business. Paytm had been hoping the RBI would eventually lift restrictions and allow it to revive its highly profitable wallet business, which had been transferred to the payments bank unit as part of earlier RBI-mandated restructuring. Sharma had as recently as January 2026 promised to bring the wallet business back to the parent company.
Broader Implications for India's Payments Bank Sector
The cancellation puts the spotlight on the declining relevance of India's payments bank model. Conceived by Indian regulators in 2014 to facilitate small deposits and cash transfers for underserved populations, payments banks lost much of their commercial rationale after the widespread adoption of the Unified Payments Interface (UPI), which enabled real-time digital transfers at no cost to users.
As business volumes dwindled, compliance costs for payments banks rose significantly, as regulators tightened monitoring requirements over concerns that small deposit accounts could be misused. The Paytm Payments Bank cancellation is likely to prompt fresh scrutiny of the long-term viability and regulatory standing of other payments bank operators in India.
For investors in One 97 Communications, the removal of the regulatory overhang from the Paytm Payments Bank saga may provide some degree of clarity, even as the company now faces the task of rebuilding its wallet and financial services business entirely outside the banking framework.
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