The Reserve Bank of India (RBI) will set audit guidelines for Paytm Payments Bank as it last week barred the company from adding new customers. 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 is submitted, the central bank will approve the final candidate for audit. It will also finalize the terms of reference based on its findings wherein the company does not fulfill the Know Your Customer (KYC) norms.
The report quoted a source as saying, “There were persistent lapses in the KYC process of the bank, such as accounts which required full KYC, were not completed.” The same source also told the publication that Paytm Payments Bank data was also coming into the company’s e-wallet business, which is reportedly against the rules and guidelines set by the central bank. “The payments bank did not plug the gap in the system despite repeated relevant references by the regulator,” the source said.
The RBI last week barred the company from adding new customers due to unsatisfactory compliance on the part of Paytm Payments Bank with regard to its customer data.
What’s happened so far?
Notably, the RBI last week restrained Paytm Payments Bank under Section 35A of the Banking Regulation Act, 1949 to stop on-boarding new customers with immediate effect. “Onboarding of new customers by Paytm Payments Bank Ltd. will be subject to specific permission. To be given by RBI after review of IT auditors’ report… This action is based on certain material supervisory concerns observed in the bank,” the RBI said. 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 systems,” the bank said.
While the RBI did not give details of the reason behind the move, reports suggest that the company was not properly verifying its customers through the prescribed guidelines, which could lead to fraud. Furthermore, reports suggested that the company was allowing data to flow through servers in China.
Paytm founder Vijay Shekhar Sharma denied any wrongdoing in an interview with CNBC-TV18. “We don’t have any servers that are outside India, and no foreign nationals have any access to our servers,” he said in the interview.
RBI post to set audit guidelines for Paytm Payments Bank: Report first appeared on BGR India.
