Clarifying Concerns: What Paytm Payments bank account holders should know amidst regulatory action
Recent regulatory action on Paytm Payments Bank has sparked concerns among depositors regarding the safety of their funds. Unlike the situations with Yes Bank or PMC Bank, industry experts assert that Paytm Payments Bank depositors need not panic.
The Reserve Bank of India (RBI) imposed business restrictions on the bank due to repeated violations of prudential norms and non-compliance with rules. However, depositors have ample time until February 29 to decide how to handle their accounts.
Individual customers have the flexibility to either retain their money with the bank, withdraw and deposit it in another account, or keep it as cash. The RBI has assured existing customers the ability to withdraw and use their funds in various services until their account balance is exhausted.
The central bank emphasized that withdrawals or utilization of balances, including FASTags and National Common Mobility Cards, are permitted without restrictions.
Notably, the money in Paytm Payments Bank accounts is considered safe due to two key reasons. Firstly, the Deposit Insurance and Credit Guarantee Corporation (DICGC), operating under the RBI, provides insurance coverage for deposits up to Rs 5 lakh in case of a bank failure.
Secondly, as per RBI regulations, payment banks like Paytm are required to invest daily deposit balances in government securities and commercial bank balances, ensuring a smooth process as per withdrawal requirements.
The DICGC insurance is applicable to active accounts until the date of liquidation, cancellation of the bank’s license, or any announced merger or reconstruction measures. Industry experts underline that the Paytm Payments Bank situation is not comparable to the crises faced by Yes Bank or PMC Bank.
In those cases, swift interventions and reconstruction schemes were implemented, ensuring depositors’ safety. Former RBI Deputy Governor N S Vishwanathan reassures Paytm Payments Bank depositors, stating that the DICGC insurance covers deposits up to Rs 2 lakh, providing an additional layer of protection and alleviating concerns about the safety of their funds.
