MUMBAI: The Reserve Bank of India (RBI) has directed Paytm Payments Bank (Paytm) to stop, onboarding of new customers with immediate effect citing 'material supervisory concerns', which means Paytm cannot enrol new customers to open fresh accounts.

The RBI directive issued on Friday says, "Reserve Bank of India has today, in exercise of its powers, inter alia, under section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank Ltd to stop, with immediate effect, onboarding of new customers."

RBI has also directed Paytm to appoint an IT audit firm to conduct a comprehensive system audit of its IT system, and any future onboarding of new customers by Paytm will be subject to specific permission to be granted by the RBI after reviewing the report of the IT auditors.

This is not the first time that Paytm has come under regulatory scanner, in 2018, it was stopped from onboarding new customers following the RBI audit on adherence to KYC. In October 2021 RBI had imposed a monetary penalty of Rs 1 crore on Paytm for an offence committed under Section 26 (2) of the Payment and Settlement Systems Act, 2007.

Paytm was incorporated in 2015 and formally began its operations in May 2017 from a branch in Noida and offers savings and current accounts with a debit card, and since then grown into the largest digital payments enabler in the country with over 6 crore accounts and over 300 million digital wallets. It has also issued seven million Visa debit cards through its platform in the financial year 2021.

Paytm reported a Rs 19 crore profit for the financial year 2018-2019, making it the first payments bank in India to become profitable, in 2019-2020 company registered a profit of Rs 29.8 crore.

In December 2020, the RBI had barred HDFC Bank from launching any new digital products or services and issuing new credit cards till the lender resolved recurring tech issues.