RBI cancelled Paytm Payments Bank's licence in January 2024, ordering winding up under Banking Regulation Act Section 22(3). The central bank cited four major violations: affairs detrimental to depositors' interests, prejudicial management character, no public purpose served, and non-compliance with license conditions. This marks the first payments bank licence cancellation since the category's 2015 launch. Depositors retain deposit insurance coverage up to ₹5 lakh per account through DICGC.

The Paytm Payments Bank cancellation represents RBI's strictest regulatory action against the payments bank model, highlighting systemic governance failures. Under Section 22(3) of the Banking Regulation Act, RBI can cancel licenses when banks operate detrimentally to depositor interests or violate license conditions. The decision stems from repeated non-compliance with KYC norms, irregular account opening practices, and governance lapses that emerged during RBI inspections. This action significantly impacts India's digital payments ecosystem, as Paytm was among the largest payments banks by transaction volume. The winding up process involves DICGC ensuring deposit protection while RBI appoints liquidators to settle affairs. This precedent strengthens RBI's supervisory framework over new-age banks and reinforces that regulatory compliance cannot be compromised regardless of technological innovation or market position. The case demonstrates RBI's commitment to maintaining banking system integrity even at the cost of disrupting popular fintech services, setting clear expectations for other payments banks regarding governance standards and regulatory adherence.