PIL against Paytm; RBI comes to rescue

Abhijit Mishra, a financial economist, has successfully moved a PIL against Paytm’s Postpaid Wallet service in Delhi High Court. The petition filed against the credit and loan disbursement activity by Paytm Payment Bank Ltd, calling it illegal and clear violation of RBI’s guidelines for Payment bank services.

Abhijit Mishra’s counsel Adv Payal Bahl has told the court that Paytm payments bank has been giving credits to its customer by using the post paid wallet service, as part of which a customer can book tickets, do multiple recharges, shop and can make the payment the following month with zero percent interest.

The petition has claimed that Paytm’s post paid service is sharing personal information of customers like Aadhar and PAN card details with third party service providers. The PIL also seeks a punitive action against Paytm and also suggests court to instruct RBI to depute a senior official of the department to Paytm’s board to supervise the audit of operations and regulatory compliance. The PIL insists on an inquiry against the directors, management and officers of Paytm Payment Bank Ltd for malpractice and violation of Article 21 of the Indian Constitution, Banking Regulation Act, Payments and Settlements Act and other relevant acts.

Paytm in its defence has filed an application, saying about a license that is issued by the RBI to the payment bank for carrying out banking business, but with certain set of condition attached to the license. Paytm claims the petition is based on incorrect understanding of law and facts. The company has declared that Paytm application is owned by 0ne9 communication which develops technology for electronic payments and Paytm Payments Bank Ltd merely uses the technology provided by One9 Communication on a service agreement basis. It has also stated that the post paid service is provided by Clix Finance India which is a NBFC and is in loan business.

Their affidavit added that it only shares the KYC Id of customer with Clix after explicit consent of the customer and refrains from sharing any kind of personal information with any third parties. Also the money credited is shown on the loan books of Clix and not on their Paytm wallet.

RBI opposed the plea in its affidavit and has mentioned the section 22 of the Banking Regulation Act which allows the institution to issue banking license to companies to carry out business in India with some conditions attached to the license. It has also directed the attention the of the court to the fact that the petitioner has sought relief from Paytm but made RBI as first party in the PIL as it cannot be filed against a private entity. Delhi High Court has decided to hear the matter on 18th September.