The Reserve Bank of India (RBI) has formally removed Paytm Payments Bank Limited (PPBL) from the list of scheduled banks, completing another key step in the lender’s closure.
The RBI said Paytm Payments Bank has been excluded from the Second Schedule of the Reserve Bank of India Act, 1934. The exclusion was made through a notification dated July 31, 2026, which was subsequently published in the Gazette of India on September 7.
The development comes months after the central bank cancelled PPBL’s banking licence and the Delhi High Court ordered the winding up of the bank. The latest move is therefore largely part of the formal regulatory process surrounding the closure of Paytm Payments Bank.
The Delhi High Court, through orders passed in July, directed that PPBL be wound up under the Banking Regulation Act and the Companies Act. Girikumar M Nair, a former State Bank of India executive, was appointed as the Official Liquidator to oversee the process.
What led to the action
Paytm Payments Bank had been under RBI scrutiny for several years before its banking licence was cancelled.
In March 2022, the RBI stopped PPBL from onboarding new customers, citing material supervisory concerns. The bank was also directed to appoint an IT audit firm to conduct a comprehensive review of its information technology systems.
Further restrictions followed in January and February 2024. The RBI barred the bank from accepting fresh deposits, credits or top-ups in customer accounts, prepaid instruments and wallets. These restrictions significantly reduced the role of PPBL in Paytm’s digital payments ecosystem.
The RBI eventually cancelled the bank’s licence with effect from the close of business on April 24, 2026. At the time, the regulator said the affairs of PPBL had been conducted in a manner detrimental to the interests of the bank and its depositors and that the institution had not complied with conditions attached to its payments bank licence.
Paytm services continue
The latest RBI decision does not mean that Paytm as a company has stopped operating.
Paytm’s parent company, One97 Communications, had already separated its core payments business from Paytm Payments Bank after the regulatory restrictions began. Its UPI services now operate through a multi-bank model rather than depending on PPBL.
The Paytm app, UPI payments, QR-based merchant payments, Soundbox and other payment services continue to operate through banking partners. Paytm has previously said that its broader services would remain unaffected by action against the payments bank.
This distinction is important for customers. The RBI’s latest action concerns Paytm Payments Bank, not the entire Paytm platform.
Depositors and winding-up process
The closure of PPBL now moves into a more detailed liquidation phase. The RBI had said when cancelling the banking licence that the bank had sufficient liquidity to repay its entire deposit liability during the winding-up process.
The winding-up is expected to involve a large number of customers, creditors and other stakeholders. A Delhi High Court order in August noted that PPBL had more than 14 crore customers, including depositors and wallet holders, while also having more than 200 other creditors and vendors. EY Restructuring LLP was appointed as a process advisor to assist the Official Liquidator with the winding-up exercise.
The process involves verifying claims, managing depositor balances, protecting assets, settling creditors and handling regulatory and legal requirements.
Another setback for Paytm’s banking ambitions
The removal from the scheduled banks list marks the latest stage in the end of Paytm’s banking ambitions.
PPBL was once an important part of Paytm’s business model and digital payments ecosystem. Its regulatory troubles, however, forced Paytm to restructure its operations and build a payments model based on partnerships with other banks.
The latest development also had an immediate impact on investor sentiment. Shares of One97 Communications fell as much as 10% in early trading on October 8 following the RBI announcement.
For Paytm, the focus is now firmly on its fintech operations rather than running a banking subsidiary. The company’s ability to maintain customer confidence, expand UPI and merchant payments, and grow its financial services business will determine how effectively it moves beyond the long-running Paytm Payments Bank episode.
The RBI’s action also serves as a reminder of the importance of compliance and governance in India’s fast-growing fintech industry. What began as a regulatory intervention has ultimately resulted in the formal closure of one of the country’s most prominent payments banking ventures.