The Delhi High Court has sought responses from the Reserve Bank of India (RBI) and Paytm to a public interest litigation suit that questions the legality of Paytm Payments Bank’s postpaid service, the Economic Times reports. The petition, filed by economist Abhijit Mishra, claims the service violates RBI regulations on the scope of operations of payments banks as it includes credit and lending services. Section 1.6 of RBI’s operating guidelines for payments banks forbid them from performing non-banking financial activities and from lending money to anyone. From the RBI's operating guidelines for payments banks: 1.6 Restrictions on loans and advances (including lending to NBFCs) including regulatory limits PBs will not be permitted to lend to any person including their directors. However, PBs may lend to their own employees out of the bank’s own funds, as per a Board approved policy outlining the caps on such loans. Secondly, the petition claims that Paytm has not notified the RBI of its lending operations, which violates the central bank’s code of conduct for payments banks. It also says that Paytm Payments Bank’s postpaid facilities are handled by Clix Finance India Pvt, a non-banking financial company (NBFC) based in Delhi. Mishra’s petition states Paytm has not publicly disclosed that it allows a third-party firm to handle the private financial data of its consumers, and has thus violated the constitutional right to privacy, the report says. Paytm’s postpaid service is under the scanner as the company has its own payments bank. One of seven payments…
