In yet another fallout of the Reserve Bank of India's (RBI) diktat against Vijay Shekhar Sharma-led Paytm Payments Bank, the Employees Provident Fund Organisation (EPFO) will stop accepting claims with the bank accounts in the entity from February 23, 2024.

"RBI has imposed restrictions on deposit and credit transactions in the customer accounts of Paytm Payments Bank after February 29, 2024. All the field officers are advised to refrain from accepting claims associated with bank accounts in Paytm Payments Bank Ltd w.e.f. February 23, 2024. Publicity should be initiated to raise awareness about this change," a circular signed by the government’s social security body’s regional profit fund commissioner-I (banking), Dheeraj Gupta, says.

The development comes after the RBI's stringent action against Paytm parent One97 Communications Ltd's associate bank Paytm Payments Bank on January 31, 2024, in which the RBI was asked to immediately stop onboarding of new customers. Paytm Payments Bank is 51% owned by Paytm CEO Vijay Shekhar Sharma while the remaining 49% is owned by One 97 Communications.

As per the company, the RBI’s action is likely to have a worst-case impact of ₹300-₹500 crore on its annual EBITDA going forward. However, it expects to continue on its trajectory to improve its profitability.

The RBI in its audit report had found "persistent non-compliances and continued material supervisory concerns" in the bank. The bank has been directed that no further deposits or credit transactions or top-ups will be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024.

Withdrawal of funds or their use by customers from savings, current accounts, prepaid instruments, FASTags, National Common Mobility Cards, etc., will permitted without any restrictions, up to their available balance. Paytm was also asked to terminate the nodal accounts of parent One97 Communications and Paytm Payments Services before February 29, 2024.

Explaining the rationale behind the harsh decision against Paytm Payments Bank, Reserve Bank of India (RBI) governor Shaktikanta Das after the monetary policy announcement on Thursday said the banking regulator had given ample time to Paytm Payments Bank to comply with regulations. He said the business restrictions were imposed only when the entity did not listen to constructive engagement.

"We give sufficient time to every RE to comply with the requirements. Sometimes it may look more than sufficient. We are a responsible regulator. If everything has been complied with then why should we act?" Das said. "Our emphasis is always on bilateral engagement with RE. We focus on nudging the RE to take corrective action and sufficient time is given," he added.

Shares of Paytm parent, One97 Communications, tumbled nearly 9% in early trade on Friday. The shares opened lower for the second straight session at ₹416.35, down 6.9% against the previous closing price of ₹447.1 on the BSE. The share price has plummeted 45% in the last seven sessions, eroding over ₹19,000 crore in market capitalisation, after the RBI issued the directive against PPBL on January 31, 2024.

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