RBI cancels Paytm Payments Bank licence, orders winding up after multi-year curbs

The Reserve Bank of India has cancelled the banking licence of Paytm Payments Bank with effect from April 24, 2026, formally bringing to an end a prolonged regulatory crackdown that had already rendered the entity largely non-operational over the past two years.

The licence has been revoked under Section 22(4) of the Banking Regulation Act, 1949, with the payments bank now barred from undertaking any form of banking business. The central bank said it will approach the High Court to initiate winding-up proceedings.

Reassuring depositors, the RBI said Paytm Payments Bank has sufficient liquidity to repay its entire deposit liabilities, ensuring customers can withdraw their funds during the wind-down process.

In its order, the regulator noted that the affairs of the bank were conducted in a manner detrimental to the interests of the institution and its depositors, and that its management was prejudicial to public interest. It added that the bank had failed to comply with conditions under its payments bank licence and that no useful purpose would be served by allowing it to continue operations.

No impact, services uninterrupted

Paytm stated that following the Reserve Bank of India’s decision on April 24, 2026 to cancel the banking licence of Paytm Payments Bank Limited (PPBL) with effect from close of business on April 24, 2026, there will be no financial or business impact on One 97 Communications Limited. The company clarified that it has no exposure to PPBL or any material business arrangements with it, and that PPBL operates as an independent entity without any board or management overlap.

Paytm further noted that it had already impaired its investment in PPBL as of March 31, 2024. All Paytm services, including the Paytm app, UPI, Paytm Gold, QR, Soundbox, card machines, and payment gateway, will continue to operate without interruption. The company emphasised that the matter is limited to PPBL and should not be attributed to Paytm’s overall operations.

The licence cancellation marks the culmination of a regulatory action that began in March 2022, when the RBI first barred the bank from onboarding new customers. Restrictions intensified in January 2024, when the central bank effectively shut down core operations by disallowing fresh deposits, credit transactions and wallet top-ups. By March 15, 2024, the bank was no longer permitted to accept any fresh funds into customer accounts, prepaid instruments or wallets, effectively freezing its liability side.

This triggered a structural separation between Paytm’s banking arm and its broader payments ecosystem. In March 2024, the Payments Corporation of India approved Paytm as a third-party application provider, allowing it to continue UPI services through partner banks. The UPI handle was migrated to a multi-bank framework led by Yes Bank.

Over the following months, Paytm shifted merchant settlements and payment flows to partner banks, while its wallet business became a non-reloadable instrument after March 2024. Although the payments bank remained legally in existence, it was functionally dormant through 2024 and 2025, with no meaningful banking activity.

Parallel regulatory approvals supported this transition. One97 Communications received approval to onboard new UPI users in October 2024, while Paytm Payments Services secured a payment aggregator licence in November 2025, cementing the group’s shift to a payments distribution model independent of its bank.

Given this transition, the RBI’s move is widely seen as a formal closure of an already defunct entity, with limited incremental operational or earnings impact on the listed parent.

As per people in the know of the regulatory thinking behind the move, CNBC-TV18 has learnt that the extended gap between the imposition of operational restrictions in early 2024 and the eventual licence cancellation in April 2026 was to ensure an orderly exit. By freezing fresh deposits, credits and wallet top-ups from March 2024 while still permitting withdrawals and usage of existing balances, the regulator effectively placed the bank in a run-down mode, giving customers adequate time to withdraw or utilise their funds. This phased approach was intended to avoid disruption, ensured depositor protection, and allowed the liability book to shrink naturally before the formal winding-up process was initiated, explained two people who did not wish to be named.

Paytm Payments Bank was granted in-principle approval in August 2015, commenced operations in May 2017, and was inaugurated by then Finance Minister Arun Jaitley.

Shares of Paytm have risen over 11% in the past month and more than 27% over the last year.