The Reserve Bank of India (RBI) has formally removed Paytm Payments Bank Limited (PPBL) from the list of scheduled banks, another major step in the wind-down of the bank after the central bank cancelled its banking licence in April 2026. The RBI said PPBL has been excluded from the Second Schedule to the Reserve Bank of India Act, 1934, following the cancellation of its licence and subsequent court-directed winding-up process.
The latest action does not represent a fresh operating restriction on Paytm’s consumer app or its UPI business. It applies specifically to Paytm Payments Bank, a separate legal entity from listed One97 Communications. Paytm had previously said that the cancellation of PPBL’s banking licence did not have a direct financial impact on the parent company and that services such as Paytm UPI, the Paytm app, Paytm Gold and other businesses would continue independently.
Key takeaways
- RBI has removed Paytm Payments Bank Limited from the Second Schedule of the RBI Act.
- The exclusion follows the cancellation of PPBL’s banking licence in April 2026.
- RBI’s licence cancellation said PPBL’s affairs were conducted in a manner detrimental to the bank and its depositors.
- The Delhi High Court subsequently ordered the winding up of PPBL.
- RBI’s notification removing PPBL from the scheduled-bank list was issued on July 31, 2026 and published in the Gazette in September.
- The latest action is part of PPBL’s regulatory wind-down rather than a new ban on Paytm’s broader fintech operations.
- Paytm and PPBL are separate entities, and Paytm has said its UPI and other services are not dependent on PPBL.
- PPBL had already been prohibited from onboarding new customers since 2022 and faced much broader deposit and credit restrictions in 2024.
- RBI said PPBL had sufficient liquidity to repay its entire deposit liability when it cancelled the licence.
What does RBI’s latest decision mean?
The RBI’s latest decision is essentially a formal regulatory consequence of PPBL no longer being a licensed banking institution.
A scheduled bank is a bank included in the Second Schedule of the RBI Act. Inclusion in that schedule is tied to meeting the conditions prescribed under the law and provides the institution with the regulatory status and facilities associated with scheduled banks.
By directing that PPBL be excluded from the Second Schedule, RBI has formally removed the entity from that category.
The notification was dated July 31, 2026, and was subsequently published in the Gazette of India in September. The announcement became public on October 7.
Importantly, the move follows an earlier and much more consequential action.
RBI had already cancelled PPBL’s banking licence in April.
Therefore, the latest exclusion should not be interpreted as RBI suddenly shutting down an otherwise functioning bank.
It is another legal and administrative step in the process of winding up an institution whose banking licence has already been cancelled.
RBI had cancelled PPBL’s banking licence in April
On April 24, 2026, RBI cancelled the banking licence of Paytm Payments Bank under Section 22(4) of the Banking Regulation Act, 1949.
The cancellation took effect at the close of business on the same day.
RBI said PPBL could no longer conduct the business of banking under the Banking Regulation Act and announced that it would approach the High Court for the bank’s winding up.
The central bank cited several reasons for the cancellation.
According to RBI, the affairs of the bank were being conducted in a manner detrimental to the interests of the bank and its depositors. It also said the general character of the management was prejudicial to depositor interests and the public interest.
RBI further said that allowing the bank to continue would serve no useful purpose or public interest and that PPBL had failed to comply with conditions attached to its payments-bank licence.
Those findings formed the foundation for the bank’s licence cancellation.
PPBL is now being wound up
The licence cancellation was followed by a court-supervised winding-up process.
The Delhi High Court ordered PPBL’s winding up in July 2026 following RBI’s application. The court also cleared the appointment of Girikumar M Nair, a former State Bank of India chief general manager, as the official liquidator.
That development is important because it shows that the regulatory process has moved beyond simply restricting PPBL’s activities.
The bank is now being formally wound down.
The removal from the Second Schedule therefore fits into this sequence:
PPBL REGULATORY WIND-DOWN
2022
RBI stops new-customer onboarding
│
▼
2024
Deposits / credits / top-ups restricted
│
▼
April 2026
Banking licence cancelled
│
▼
July 2026
Delhi HC orders winding up
│
▼
July 31, 2026
RBI directs removal from Second Schedule
│
▼
September 2026
Gazette publication
│
▼
October 2026
Removal publicly reportedThe sequence shows that the scheduled-bank removal is part of a longer process rather than an isolated regulatory action.
Why did RBI cancel the licence?
PPBL had been under regulatory pressure for several years before its licence was cancelled.
The first major action in this sequence came in March 2022, when RBI directed the bank to stop onboarding new customers after identifying what it described as material supervisory concerns.
The bank was also directed to appoint an IT audit firm to conduct a comprehensive audit of its information-technology systems.
The situation escalated in early 2024.
On January 31 and February 16, RBI imposed additional business restrictions on PPBL. Among other measures, the bank was prevented from accepting further deposits, credits or top-ups into customer accounts, prepaid instruments and wallets.
Customers could continue to withdraw or use existing balances subject to the applicable restrictions.
These measures effectively prevented PPBL from operating as a normal deposit-taking payments bank.
The 2024 restrictions were a turning point
The restrictions announced in 2024 were particularly significant because deposits and credit transactions are fundamental parts of banking operations.
RBI’s action meant PPBL could no longer continue several of the activities that had supported its banking model.
The regulator had cited concerns relating to compliance, customer due diligence, technology infrastructure and other issues in its earlier actions.
The subsequent licence cancellation in April 2026 therefore came after years of regulatory intervention rather than appearing without warning.
The timeline is important because it demonstrates how RBI escalated its response:
Supervisory concerns → onboarding restriction → business restrictions → licence cancellation → winding up → removal from scheduled-bank list.
What happens to Paytm itself?
One of the most important distinctions in the story is between Paytm and Paytm Payments Bank.
Paytm’s listed parent is One97 Communications Limited.
PPBL is a separate entity.
When RBI cancelled PPBL’s licence, Paytm said the action did not have a direct financial impact on One97 Communications because the company had already impaired its investment in PPBL.
Paytm also said PPBL had no material business arrangement with the listed company and that Paytm’s core services could continue independently.
That distinction remains relevant today.
The removal of PPBL from the scheduled-bank list does not mean that the Paytm app has been removed from the market.
It does not mean Paytm UPI has been cancelled.
It does not mean Paytm’s other fintech businesses have been shut down.
The action concerns the banking entity itself.
Paytm UPI is a separate business relationship
Paytm’s UPI operations were already shifted away from dependence on PPBL after the RBI restrictions began affecting the payments bank.
Paytm’s parent company has continued operating its consumer-facing payments business through banking partners and other arrangements.
That is why users should not interpret the latest RBI announcement as meaning that Paytm’s UPI service itself has ceased to exist.
The central regulatory issue is PPBL’s banking licence and its corporate wind-down.
Why the scheduled-bank status matters
The phrase “scheduled bank” can sound technical, but it has an important legal meaning.
The Second Schedule to the RBI Act contains the recognised scheduled banks.
These institutions meet the conditions specified under the Act and have access to the regulatory framework and facilities associated with scheduled-bank status.
PPBL’s removal means the bank is no longer recognised in that category.
But because RBI had already cancelled its banking licence, the practical significance for everyday customers is considerably smaller than the April licence cancellation.
The latest action is better understood as formalising PPBL’s changed legal status as the wind-down progresses.
RBI says PPBL has enough liquidity
When RBI cancelled the banking licence in April, it also provided an important assurance about PPBL’s financial position.
The central bank said PPBL had enough liquidity to repay its entire deposit liability upon winding up.
According to PPBL’s FY25 annual report, the bank had customer deposits of approximately ₹1,395.22 crore as of March 31, 2025, across wallets and current and savings accounts.
It also had total gift instruments of approximately ₹33.13 crore, according to Business Standard’s reporting on the RBI licence cancellation.
This liquidity statement matters because winding up a bank requires a mechanism for dealing with its remaining liabilities.
RBI’s position was that PPBL had sufficient liquidity to meet its deposit obligations.
PPBL’s ownership structure
PPBL was closely associated with Paytm from its creation, but its ownership structure was not identical to that of One97 Communications.
According to PPBL’s FY25 annual report, Vijay Shekhar Sharma held 51% of the payments bank while One97 Communications held 49%.
The separation between the two entities became increasingly important after RBI’s regulatory restrictions.
Paytm subsequently emphasised that PPBL operated independently and that its board and management were separate from One97 Communications.
This corporate separation is one reason why the latest RBI action should not automatically be interpreted as an action against Paytm’s entire business.
PPBL’s rise and fall
The development marks the end of a major experiment in India’s digital banking ecosystem.
RBI granted in-principle payments-bank licences to a group of companies in 2015.
Paytm Payments Bank eventually began operations in May 2017, becoming one of India’s most visible payments-bank businesses.
Its model was built around digital payments, deposits and other limited banking services permitted under the payments-bank framework.
The business benefited from the rapid expansion of India’s digital-payments ecosystem.
Paytm became one of India’s best-known consumer fintech brands, while its payments bank provided a banking layer connected to the broader ecosystem.
But the relationship between the fintech business and the banking entity became increasingly complicated as RBI’s supervisory concerns escalated.
The payments-bank model has faced broader challenges
PPBL’s closure also raises questions about the long-term viability and economics of the payments-bank model.
Payments banks were designed to expand access to basic financial services without allowing them to undertake conventional lending.
They could accept deposits subject to regulatory limits and offer payment and remittance services, but their business model differed fundamentally from that of traditional commercial banks.
The sector has subsequently seen consolidation and changes in the number of active players.
Business Standard reported that RBI originally granted in-principle licences to 11 payments banks in 2015, while only a smaller number remain operational. Fino Payments Bank, for example, has received approval to transition toward a small-finance-bank model.
That broader evolution provides context for PPBL’s winding down.
This is not a new action against Paytm
The wording of the latest announcement could create confusion because “RBI removes Paytm Payments Bank from scheduled banks” sounds like a fresh regulatory punishment.
It is more accurately described as a follow-on legal step.
The key action happened in April, when RBI cancelled the banking licence.
The second major development occurred in July, when the Delhi High Court ordered the bank’s winding up.
The July 31 notification removing PPBL from the Second Schedule is consistent with those earlier developments.
The October announcement makes that regulatory status more visible to the public.
Timeline of Paytm Payments Bank’s regulatory crisis
| Date | Development |
|---|---|
| August 2015 | RBI grants in-principle payments-bank licence |
| May 2017 | Paytm Payments Bank begins operations |
| March 2022 | RBI stops PPBL from onboarding new customers |
| January–February 2024 | RBI imposes restrictions on deposits, credits and top-ups |
| April 24, 2026 | RBI cancels PPBL’s banking licence |
| July 2026 | Delhi High Court orders PPBL’s winding up |
| July 31, 2026 | RBI directs exclusion from Second Schedule |
| September 2026 | Gazette publication |
| October 7, 2026 | RBI’s scheduled-bank removal becomes public |
What the latest move means for customers
For customers who previously used PPBL services, the important regulatory event was the earlier restriction on deposits and banking operations.
The October removal from the scheduled-bank list does not suddenly create a new restriction on ordinary Paytm users.
Instead, it confirms that PPBL is no longer operating as a scheduled banking institution.
The practical focus is now on completing the winding-up process and resolving the bank’s remaining liabilities and assets under the supervision of the appointed liquidator.
For users of Paytm’s broader fintech services, the relevant question remains which entity provides each service.
Paytm’s UPI and other businesses are not synonymous with PPBL.
What this means for Paytm’s business strategy
The closure of PPBL has forced Paytm’s business model to evolve.
Rather than relying on an affiliated payments bank as the central financial-services layer, Paytm has increasingly built relationships with third-party banks and financial institutions.
That structure allows the consumer-facing Paytm platform to continue providing payment services without owning the same banking infrastructure.
The separation also reduces the risk that a regulatory action against a banking subsidiary automatically shuts down the entire fintech platform.
However, it means Paytm has less direct control over the banking layer of its ecosystem.
What investors should watch
For Paytm shareholders, the key issue is no longer whether PPBL will continue operating as a bank.
That question has effectively been answered by the licence cancellation and winding-up process.
The more important questions are:
- How efficiently can Paytm operate without its own payments-bank entity?
- How quickly can it scale UPI and merchant-payment services through partner banks?
- Can it expand financial services without assuming bank-level regulatory risk?
- What financial liabilities, if any, remain associated with the PPBL wind-down?
- How will the liquidation process affect the former banking entity’s remaining assets and obligations?
Paytm has already said it does not have material financial exposure to PPBL.
The eventual completion of the liquidation process will provide further clarity.
The Bigger Picture
RBI’s removal of Paytm Payments Bank from the scheduled-bank list is best understood as the latest chapter in the regulator’s multi-year action against PPBL. The bank moved from customer-onboarding restrictions in 2022 to severe business restrictions in 2024, licence cancellation in April 2026 and court-ordered winding up in July.
For Paytm, the development is significant symbolically but should not be confused with the shutdown of the broader fintech platform. One97 Communications and PPBL are separate entities, and Paytm has built its payments operations around banking partners after PPBL’s restrictions. The company’s challenge now is to grow its payments and financial-services ecosystem without relying on an affiliated bank.
For India’s fintech sector, the episode also demonstrates the importance of regulatory separation between technology platforms and regulated financial institutions. A fintech can build a large consumer franchise, but operating a bank carries a substantially different level of compliance, governance and supervisory responsibility.
Looking Ahead
The immediate next step is the completion of PPBL’s winding-up process under the Delhi High Court’s order and the appointed liquidator. The RBI’s exclusion of PPBL from the Second Schedule removes another formal element of the bank’s former regulatory status.
For Paytm, the longer-term story will be about what comes after the payments bank. The company’s ability to maintain UPI scale, merchant relationships and financial-services growth through partner banks will determine whether the end of PPBL becomes a lasting strategic disadvantage or simply the conclusion of an unsuccessful banking chapter.
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