The Reserve Bank of India, in exercise of its powers under section 35A of the Banking Regulation Act, 1949, has directed Paytm Payments Bank (PPBL) to stop accepting deposits or top-ups in any customer accounts, wallets, FASTags and other instruments after February 29.
However, any interest, cashbacks, or refunds may be credited back to customers anytime.
The direction follows persistent non-compliances and continued material supervisory concerns.
On March 11, 2022, the RBI had barred PPBL from onboarding new customers.
Reserve Bank of India
• The Reserve Bank of India (RBI) is India’s central banking institution, which controls the monetary policy.
• It commenced its operations on April 1, 1935 in accordance with the Reserve Bank of India Act, 1934.
• Following India’s Independence, the RBI was nationalised on January 1, 1949.
• The RBI has four zonal offices at Chennai, New Delhi, Kolkata and Mumbai. It has offices at 33 locations across India.
• As the central bank of India, RBI is an independent apex monetary authority which regulates banks and provides important financial services like storing of foreign exchange reserves, control of inflation, monetary policy report.
• A central bank is a vital financial apex institution of an economy and the key objectives of central banks may differ from country to country. Still, they perform activities and functions with the goal of maintaining economic stability and growth of an economy.
• The RBI plays an important part in the development strategy of the country.
• The general superintendence and direction of the RBI is entrusted with the 21-member central board of directors.
• It consists of the governor, four deputy governors, two finance ministry representatives, 10 government-nominated directors to represent important elements of India’s economy, and four directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and New Delhi.
Main functions of RBI
• Monetary Authority: Formulates, implements and monitors the monetary policy.
- Objective: Maintaining price stability while keeping in mind the objective of growth.
• Regulator and supervisor of the financial system: Prescribes broad parameters of banking operations within which the country’s banking and financial system functions.
- Objective: Maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.
• Manager of foreign exchange: Manages the Foreign Exchange Management Act, 1999.
- Objective: To facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
• Issuer of currency: Issues and exchanges or destroys currency and coins not fit for circulation.
- Objective: To give the public adequate quantity of supplies of currency notes and coins and in good quality.
• Developmental role: Performs a wide range of promotional functions to support national objectives.
• Regulator and supervisor of payment and settlement systems: Introduces and upgrades safe and efficient modes of payment systems in the country to meet the requirements of the public at large.
- Objective: Maintain public confidence in payment and settlement system
• Banker to the government: Performs merchant banking function for the central and the state governments. Also acts as their banker.
• Banker to banks: Maintains banking accounts of all scheduled banks.
Powers of the RBI
• The RBI regulates and supervises public sector and private sector banks.
• The powers of RBI are wide-ranging and comprehensive to deal with various situations that may emerge in all banks.
Under the provisions of the Banking Regulation Act, 1949, it can:
i) Inspect the bank and its books and accounts.
ii) Examine on oath any director or other officer of the bank.
iii) Cause a scrutiny to be made of the affairs of the bank.
iv) Give directions to secure the proper management of the bank.
v) Call for any information of account details.
vi) Determine the policy in relation to advances by the bank.
vii) Direct special audit of the bank.
viii) Direct the bank to initiate insolvency resolution process in respect of a default, under the provisions of Insolvency and Bankruptcy Code, 2016.
ix) Issue directions to banks for resolution of stressed assets.
x) Direct changes in management of the bank.
xi) Caution or prohibit banks in particular against entering into any particular transaction or class of transactions, and generally give advice to any bank.
xii) Give assistance to any bank by means of the grant of a loan or advance.
xiii) Direct banks to call a meeting of its directors for the purpose of considering any matter relating to or arising out of the affairs of the bank, or require an officer of the bank to discuss any such matter with an officer of the RBI.
xiv) Appoint one or more of its officers to observe the manner in which the affairs of the bank or of its offices or branches are being conducted and make a report thereon.
• RBI also maintains the Central Repository of Information on Large Credits (CRILC) on aggregate fund-based and non-fund-based exposures of Rs 5 crore and above of all banks.
• RBI maintains the Central Fraud Registry and banks report all frauds involving amounts above Rs 1 lakh to RBI.
• In addition, RBI’s Master Directions on Frauds lay out guidelines on categorisation, reporting and review of frauds, along with norms for consequent provisioning.
