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Paytm Payments Bank Faces Restrictions on Issuing Fresh FASTags Following Non-Compliance

Paytm Payments Bank faces restrictions on issuing new FASTags after an audit revealed non-compliance with prescribed parameters. The bank may face penalties as Indian regulators scrutinize its operations.

Paytm Payments Bank has been barred from issuing new FASTags by the Indian Highways Management Company Ltd (IHMCL) due to non-compliance with the prescribed parameters in the service-level agreement (SLA). An audit prompted by customer complaints led to this decision. While existing FASTag customers of the bank will not be affected, Paytm Payments Bank may face penalties for its non-compliance as IHMCL seeks a response from the company.

Audit Reveals Non-Compliance

The decision to impose restrictions on Paytm Payments Bank came after an audit initiated by IHMCL following an influx of customer complaints. IHMCL, the arm of NHAI dealing with toll-related matters, took this action to address the bank's non-compliance.

Background and Regulatory Scrutiny

Paytm Payments Bank had received approval from the Reserve Bank of India (RBI) to operate as a Bharat Bill Payment Operating Unit (BBPOU) a year ago. This allowed the bank to facilitate bill payment services for utilities, loans, FASTag recharge, credit card bills, education fees, and municipal taxes.

However, in March of the previous year, RBI prohibited the payments bank from onboarding new customers due to "certain material supervisory concerns."

Ongoing Non-Compliance Issues

This development is the latest in a series of non-compliance issues faced by Paytm Payments Bank. In October, RBI imposed a penalty of INR 5.39 Crores on the bank for failing to comply with Know Your Customer (KYC) norms.

Despite these challenges, Paytm has made efforts to reduce its losses, cutting its net loss by 43% to INR 222 Crores in the quarter ending December 2023 compared to INR 392 Crores in the same period the previous fiscal year. The bank's operating revenue also increased to INR 2,850 Crores in Q3 FY24, marking a 38% rise from INR 2,062 Crores in Q3 FY23.