The RBI barred Paytm Payments Bank from taking on new customers on March 11 because it had allowed data to flow to servers abroad in violation of India’s rules, and didn’t properly verify its customers, Bloomberg reported on Monday, citing a person familiar with the matter.
Annual inspections by the Reserve Bank of India found that the company’s servers were sharing information with China-based entities that indirectly own a stake in Paytm Payments Bank, the source added.
“The recent Bloomberg report on Paytm Payments Bank claiming data leak to Chinese firms is completely false and simply sensationalizing. Paytm Payments Bank is proud to be a completely homegrown bank and is fully compliant with RBI’s directions on data localisation. All of the Bank’s data resides within the country. We are true believers of the Digital India initiative, and remain committed to driving financial inclusion in the country,” a Paytm Payments Bank spokesperson said.
Paytm Payments Bank is a joint venture between Paytm and its founder Vijay Shekhar Sharma. China’s Alibaba Group Holding and its affiliate, Jack Ma’s Ant Group, own shares of Paytm, according to exchange filings.
On Friday, the RBI had barred Paytm Payments Bank from adding more customers, citing “material supervisory concerns”. The bank directed it to appoint an IT audit firm for a comprehensive system audit of its IT system.
Paytm Payments Bank has over 300 million wallets and 60 million bank accounts, according to its website.
Shares of One 97 Communications Ltd, Paytm’s parent company, fell more than 13% on Monday. (Economic Times)
