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The Reserve Bank of India filed an affidavit in reply to a PIL in Delhi High Court claiming that Paytm Payments Bank Ltd’s ‘post paid’ service was in fact a lending facility and the same was operating contrary to the existing law and guidelines regulating such entities. RBI, in its affidavit, said that a Public Interest Litigation (PIL) cannot be used as a weapon to challenge the financial or economic decisions taken by the government or the RBI. It pointed out the fact that the PIL sought relief against Paytm but made RBI the first party only to fashion it as a plea against a state entity, to be maintained as a PIL.

A bench of Chief Justice D N Patel and Justice C Hari Shankar was hearing the petition Abhijit Mishra v Reserve Bank of India & Paytm Payments Bank contending that RBI’s guidelines for payments banks, like Paytm, do not permit credit or loan disbursement activities by such entities.

In its affidavit, RBI said that by virtue of Section 22 of the Banking Regulation Act, RBI is empowered to issue banking licence to a company to carry on banking business in India.

The affidavit said, “Upon an application made in this behalf by respondent 2 (Paytm), a licence to carry on banking business in the style of a ‘payments bank’ has been issued by the RBI subject to certain conditions enumerated in the licence itself. These conditions along with the operating guidelines issued by the RBI, specify the broad contours within which a payments bank is required to operate, strictly adhering to the same.”

RBI informed the court that for initiating action under the relevant provisions of the BR Act, RBI has to satisfy that Paytm has acted in such a manner which is detrimental to the interests of the depositors. No action can be initiated solely on the baseless allegation of the petitioner. Hence, no relief should be granted in the petition.

Paytm also opposed the petition claiming that the plea was based on incorrect facts and incorrect understanding of law. Paytm Payments Bank Ltd does not own or operate the Paytm application and merely uses the technology and platform services of the application pursuant to a service agreement with One97 which owns the application.

It clarified that the postpaid facility is being provided by Clix Finance India which is an NBFC and is in the business of providing loans/ credit facility. “Paytm Payments Bank Ltd and Clix have an arrangement for sharing of C-KYC Identifier of customer only after explicit consent being provided by the customer,” it said.

The affidavit also informed the court that Paytm Payments Bank Ltd shares only the KYC Id (Know Your Customer identity) with Clix and not any personal or sensitive information of the customers.

“On availing the Paytm postpaid facility the disbursed amount is not credited to the customer’s wallet or bank account but it gets reflected in the loan books of Clix as it is a facility being provided by Clix to its customers. This is explicitly clear that Paytm Payments Bank Ltd is not providing any credit facilities/ loans to its customers,” it said.

The petition claimed, “the Paytm Payments Bank Ltd 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 petition has further claimed that Paytm’s ‘post paid’ service is sharing personal information, like Aadhaar and PAN, of customers with third parties. 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 from the High Court to transfer all the profits earned from the Paytm ‘post paid’ service to the Prime Minister’s Relief Fund for the welfare of the nation.

Court posted the matter for further hearing on 18th September 2019.

–India Legal Bureau

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