In a significant move, the Reserve Bank of India (RBI) has revoked Paytm Payments Bank’s banking licence more than two years after initially imposing operational restrictions over compliance issues.
The RBI announced its decision on April 24, 2026, and plans to seek a court order for the bank’s liquidation. The cancellation is based on conduct deemed detrimental to depositors’ interests and in violation of public interest norms. This marks the first time an Indian specialised payments bank has had its licence revoked by the RBI.
Background and Regulatory Timeline
PPBL was granted a limited banking license in August 2015 under regulations aimed at supporting small deposits and domestic cash transfers. Unlike traditional banks, payments banks are restricted to accepting small deposits but cannot offer loans directly.
In January 2024, the RBI ordered PPBL to cease accepting new deposits, citing non-compliance in various areas including customer due diligence, use of funds management, and technology infrastructure. After this directive, the bank’s operations were confined to processing withdrawals from existing accounts and facilitating loan referrals via banking correspondents.
According to internal discussions reported by Reuters, RBI officials considered whether to cancel PPBL’s license or seek a merger with another entity in February 2026. Airtel Payments Bank, backed by Bharti Airtel, had previously shown interest but failed to proceed further. Ultimately, the RBI chose direct cancellation over a potential merger.
Impact on One 97 and the Payments Bank Model
One 97 Communications, which holds a 51% stake in PPBL, stated that the license cancellation would have no financial impact. The company emphasized that it has no direct exposure to PPBL nor any significant business ties with the bank, and pointed out that PPBL operates independently of One 97 management.
The cancellation underscores One 97’s reduced focus on deposit-taking services. Previously, the parent company had transferred its wallet operations to Paytm Payments Bank as part of regulatory restructuring efforts, and had expressed intentions to reclaim this business unit in the future.
More broadly, the revocation highlights the declining role of payments banks in India’s financial landscape. The rise of Unified Payments Interface (UPI), which facilitates real-time digital transactions at scale, has significantly reduced the relevance of payments banks. As transaction volumes shifted to UPI, compliance costs for payments banks rose, prompting stricter regulations from the RBI regarding small deposit management and potential misuse.
