Delhi High Court Issues Notice to Paytm, RBI Over Company’s Postpaid Service

The Delhi High Court on Monday sought RBI's response on a PIL alleging that online payments platform Paytm was providing lending facilities in violation of the law regulating such activity. A bench of Chief Justice Rajendra Menon and Justice Brijesh Sethi issued notice to RBI and Paytm Payments Bank Ltd seeking their stand on the plea which claims that the company's “Postpaid” service was operating contrary to the existing law and guidelines regulating such entities.

The petition has been moved by Abhijit Mishra, a financial economist, who has contended that RBI's guidelines for payments banks, like Paytm, do not permit credit or loan disbursement activities by such entities.

“The Paytm Payments Bank has been lending to the customers through its Paytm Post Paid, thereby it is clear violation of the guidelines that prohibit lending by the payments bank,” the plea, filed through advocate Payal Bahl, has claimed.

It has sought directions to Reserve Bank of India “to take appropriate punitive actions against the Paytm Payments Bank Limited”.

The petition has also claimed that any new product launched by the payments bank needs prior approval of RBI, but in the instant case the central bank was not informed by Paytm about its “Postpaid” service.

Paytm Postpaid is a credit facility being offered by the company to its customers.

As part of this service, customers can recharge mobiles, book movie and travel tickets and also shop on Paytm and pay the following month at zero cost or interest.

The petition has alleged that Paytm's Postpaid service is sharing personal information, like Aadhaar and PAN, of customers with third parties.

“Paytm Payments Bank by the means of its unauthorised Paytm Post Paid has provided un-monitored and unauthorized access to the personal information such as Aadhaar, PAN, transactions etc. of the its customers to unauthorized third party, thereby clearly violating Article 21 of the Indian Constitution and other relevant banking acts,” the PIL has claimed.

Apart from seeking punitive action against the company, the petition has also sought directions to RBI to appoint or depute one of its senior officials to the company's Board “to overlook audit of operations and regulatory compliance”.

The plea has also sought an investigation “against the directors, management and officers of the Paytm Payments Bank Ltd for alleged malpractice and violation of provision of Article 21 of the Indian Constitution, Banking Regulations Act, Payments and Settlements Act and other relevant banking acts”.

It has further sought directions to transfer all the profits earned from the Paytm Postpaid operation to the Prime Minister's Relief Fund for the welfare of the nation.

The court directed the government and RBI to file affidavits indicating their response to the plea before the next date of hearing on September 3.

Disclosure: Paytm's parent company One97 is an investor in Gadgets 360.