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RBI imposes penalty on Paytm Payments Bank for KYC, cybersecurity violations

As per RBI, the bank’s conduct, such as not monitoring payout transactions and not risk profiling entities availing payouts, a delayed response to a cybersecurity incident, and more were in violation of several regulations.

The Reserve Bank of India (RBI) on October 10 imposed a fine of Rs 5.39 crore on Paytm Payments Bank for non-compliance with the central bank's Know Your Customer (KYC) directions, licensing guidelines, and cybersecurity framework. RBI said that it conducted a scrutiny and an audit of Paytm Payment Bank to find the company engaging in the following conduct that was in violation of various regulations: Paytm failed to identify the beneficial owner in respect of entities onboarded by it for providing payout services Paytm did not monitor payout transactions and carry out risk profiling of entities availing payout services Paytm breached the regulatory ceiling of end-of-the-day balance in certain customer advance accounts availing payout services Paytm reported a cyber security incident with a delay Paytm failed to implement device binding control measures related to "SMS delivery receipt check" Paytm's Video-Based Customer Identification Process (V-CIP) infrastructure failed to prevent connections from IP addresses outside India. The specific regulations that Paytm was in violation of are: Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016 RBI Guidelines for Licensing of Payments Banks Cyber security framework in Banks RBI had issued a notice to the bank asking it to show cause as to why a penalty should not be imposed. "After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty on the…

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