The Reserve Bank of India (RBI) on Friday directed Paytm Payments Bank Ltd to stop onboarding of new customers with immediate effect citing certain "material supervisory concerns".
The banking subsidiary of Paytm parent One97 Communications had received RBI's approval to operate as a scheduled payments bank in December last year.
RBI has asked the bank to appoint an IT audit firm to conduct a comprehensive system audit of its IT system. 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, the regulator said.
The central bank exercised its powers under section 35A of the Banking Regulation Act, 1949.
This comes months after the central bank imposed a monetary penalty of ₹1 crore on Paytm Payments Bank for deficiencies in regulatory compliance.
Earlier this week, shares of Paytm parent One97 Communications hit a record low of ₹728.50 on BSE, plunging over 66% from its issue price of ₹2,150 in less than four months. The stock closed at ₹774.80 apiece on BSE on Friday.
In February, foreign brokerage Macquarie slashed its target price of Paytm to ₹700 citing profitability concerns and widening losses.
The Vijay Shekhar Sharma-led company had reported a massive loss of ₹780 crore in the third quarter, led by large stock options cost of ₹390 crore.