RBI Excludes Paytm Payments Bank from Second Schedule Following Licence Cancellation — October 7, 2026

The Reserve Bank of India (RBI) has officially removed Paytm Payments Bank Limited (PPBL) from the Second Schedule of the Reserve Bank of India Act, 1934. The move formalises the complete cessation of PPBL's operations as a recognised commercial banking entity, following the revocation of its banking licence and a court-mandated liquidation process.

According to the central bank's statement, the exclusion follows a notification issued on July 31, which was subsequently published in the Gazette of India in September. Under Indian banking law, inclusion in the Second Schedule confers scheduled bank status, providing institutions with borrowing facilities from the RBI at the bank rate and conferring eligibility for government business and clearing house memberships.

Chronology of Regulatory Action

The exclusion from the Second Schedule follows a prolonged regulatory crackdown on PPBL, an associate company of Vijay Shekhar Sharma-led One97 Communications Limited. The central bank cited persistent non-compliance and continued supervisory concerns, stating that the bank's affairs had been conducted in a manner detrimental to depositor interests:

• March 2022: The RBI prohibited PPBL from onboarding new customers with immediate effect due to material supervisory concerns and directed the lender to appoint an external IT auditor.
• January–February 2024: The banking regulator escalated restrictions, barring the entity from accepting fresh deposits, credit transactions, or wallet top-ups after flagging severe compliance lapses and customer due diligence issues.
• April 2026: The RBI formally cancelled PPBL's payments bank licence under the Banking Regulation Act, 1949, and initiated winding-up proceedings before the high court.
• Subsequent Court Action: The Delhi High Court ordered that Paytm Payments Bank be formally wound up, leading to the liquidation process.

Implications for Paytm and Investors

For parent company One97 Communications, the regulatory de-scheduling brings legal finality to a crisis that began early in 2024. Paytm has since transitioned its core payments and financial services infrastructure to third-party partner banks, including Axis Bank, HDFC Bank, State Bank of India, and YES Bank, under the multi-bank model approved by the National Payments Corporation of India (NPCI).

Market analysts noted that the de-scheduling was already priced in by market participants, as the entity had already ceased accepting deposits and commercial operations earlier. However, the formal Gazette notification underscores the RBI's firm stance that persistent deficiencies in compliance, customer identification norms, and internal controls carry terminal consequences for regulated financial institutions.

Tags: Reserve Bank of India Paytm Payments Bank One97 Communications Fintech Banking