Paytm Faces Setback as Traders' Body Cautions Users to Switch Amid RBI Crackdown

In the wake of a crackdown by the Reserve Bank of India (RBI) on Paytm Payments Bank and its alleged regulatory violations, the Confederation of All India Traders (CAIT) has issued a cautious advisory to Paytm users, urging them to consider alternative payment apps.

CAIT, in a statement, highlighted that traders should explore other payment platforms due to the RBI's warnings about potential risks associated with Paytm Payments Bank, specifically related to Know Your Customer (KYC) violations.

"The Reserve Bank of India has imposed certain restrictions, prompting CAIT to recommend that users take proactive measures to protect their funds and ensure uninterrupted financial transactions. A large number of small traders, vendors, hawkers, and women rely on Paytm for payments, and the RBI restrictions could lead to financial disruption for these individuals," stated CAIT.

Praveen Khandelwal, CAIT Secretary General, expressed concerns about the security and continuity of financial services provided by Paytm in light of the recent RBI restrictions. He stressed the urgency of the advisory, urging traders to act promptly and make informed decisions to mitigate potential adverse effects on their financial operations.

Earlier, Paytm founder Vijay Shekhar Sharma downplayed the impact of RBI's notice against Paytm Payments Bank on the Paytm app, asserting that the two are separate entities. He assured that Paytm would continue normal operations post the February 29 deadline set by RBI. However, speculations arise that RBI might permanently suspend Paytm Payments Bank's operations after this deadline.

RBI's Concerns and Regulatory Actions

CAIT's advisory follows RBI's notice to Paytm Payments Bank, expressing concerns about potential money laundering issues as the bank allegedly failed to comply with the regulator's KYC norms. RBI has directed Paytm Payments Bank to halt various operations, including taking additional deposits, conducting credit transactions, and carrying out top-ups on any customer accounts, prepaid instruments, wallets, and cards for toll payments post-February 29.

Customers can access existing deposits and use wallet funds for services until the end of February. If RBI maintains its stance, top-ups for Paytm wallets will cease, and transactions through the platform will be discontinued.

(Report with inputs from PTI)