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RBI imposes a ₹1 crore penalty on Paytm Payments Bank for providing false information

Paytm was fined under India’s primary law for payments which arguably needs to be reassessed, according to a report.

paytm

The Reserve Bank of India (RBI) on October 1 imposed a penalty of ₹1 crore on Paytm Payments Bank for violating Section 26 (2) of Payment and Settlement Systems Act, 2007 (PSS Act), the central bank said in a press release issued on October 20.

This news comes at a time when Paytm is currently waiting to get approval for its initial public offering (IPO), which will be India’s largest ever. The company is seeking to raise $2.2 billion at a valuation of around $25 billion.

Section 26 (2) of the PSS Act states that entities willfully making false statements or willfully omitting to make material statements for information sought under the Act can be penalized.

Paytm when submitting its application for the issue of final Certificate of Authorisation (CoA) submitted information that did not reflect the factual position, RBI stated. “After reviewing the written responses and oral submissions made during the personal hearing, the RBI determined that the aforementioned charge was substantiated and warranted the imposition of a monetary penalty,” RBI added.

It is not known what factually incorrect information was presented by Paytm. The company declined to comment.

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Does the PSS Act need to be reassessed?

A new report by the Vidhi Centre for Legal Policy argues that the “policy objectives of the Payment and Settlement Systems Act, 2007, (PSS Act) do not align with the requirements of a modern retail payments law.” The report points out that the law focuses on issues related to supervisory powers of RBI from a systemic point of view but fails to touch upon key enablers for the proliferation of retail digital payments such as consumer protection and promotion of competition and innovation.

The report contends that India needs to “reassess the PSS Act taking into account the developments in the retail payments sector since its enactment and the future of digital payments in India”.

The Digital Payments Index launched by the RBI shows an increase in the adoption of digital payments across India in recent years. Making it all the more necessary for the policy objectives governing the future of the retail payments industry to keep up with the changing times.

Read: Summary: Framework For India’s New Retail Payments Law Proposed In Report

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