Paytm vs. Paytm Payments Bank: What's The Difference And Which Will Be Affected By RBI Order?

The Reserve Bank of India (RBI) has imposed crippling business restrictions on Paytm Payments Bank, affecting its operations from February 29, 2024.

This saw Paytm’s stock plummet 20% to hit the lower circuit at the start of trade on Thursday and created panic among users about how the change will affect their FASTag accounts.

However, it is essential to understand the differences between the Paytm platform and the Paytm Payments Bank to give users more clarity on which services will be impacted by the RBI directive.

Paytm vs. Paytm Payments Bank

Paytm is a widely used digital wallet and e-commerce platform in India, offering services like mobile recharges, bill payments and online shopping.

On the other hand, Paytm Payments Bank is a separate entity that functions as a bank, providing savings accounts, debit cards, and other banking services.

While both are part of the Paytm ecosystem, they serve different purposes – Paytm as a digital platform, and Paytm Payments Bank as a licensed financial institution.

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As such, Paytm Payments Bank is far more regulated by the central bank as it requires a banking license and offers more services.

Payments banks, a novel banking model introduced by the RBI, focus on specific services. They are restricted from issuing credit but can accept deposits, presently capped at ₹2 lakh per customer with potential for further increases. Unlike traditional banks, payments banks cannot provide loans or credit cards but can issue ATM and debit cards.

Additionally, these banks provide online and mobile banking services with the aim of facilitating transactions and providing essential banking services without extending credit facilities.

Which Paytm Services Will Be Affected?

As per the RBI directive, deposits, credit transactions and top-ups will be restricted from March 1, 2024 as these are related to the Paytm Payments Bank entity. Users can still avail of services such as interest, cashbacks, or refunds.

Customers can continue using the Paytm app for digital payments and UPI transactions as long as the user’s account remains connected to an external bank.

If the Paytm app or wallet is linked to a Paytm Payments Bank account, users can still continue utilising funds without restrictions. However, credits to the bank account will only be allowed until February 29 and no credits will be permitted into the bank account or wallet from March 1, 2024.

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