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RBI drops Paytm Payments Bank from Second Schedule of RBI Act

By CAShorts DeskPublished Updated Source: The Hindu

RBI drops Paytm Payments Bank from Second Schedule of RBI Act
Illustration (AI-generated)

The Reserve Bank of India has removed Paytm Payments Bank from the Second Schedule of the RBI Act, 1934, so it is no longer a scheduled bank, the central bank said on October 7, 2026. The move follows the RBI's cancellation of the bank's licence in April and a Delhi High Court order to wind it up.

Syllabus: GS3 · Indian Economy & Growth; Prelims · Current Affairs & IR; GS2 · Statutory & Regulatory Bodies

Why it matters

Banks that meet the Reserve Bank's standards sit on an official list, the Second Schedule, which gives them special operating privileges. Taking Paytm Payments Bank off that list completes, on paper, its end as a bank: its licence was cancelled in April and a court has ordered it wound up. For anyone who keeps money in a digital wallet or a payments app, the case is a reminder that convenience depends on sound compliance behind the screen. It also shows how the regulator steps up pressure, from a ban on new customers to a freeze on deposits and finally a cancelled licence, when it judges that depositors' interests are at risk.

Prelims pointers

  • A scheduled bank is a bank included in the Second Schedule to the Reserve Bank of India Act, 1934.
  • The Second Schedule lists recognised banks meeting the RBI's financial standards; listed banks get special operational privileges.
  • Section 42(6) of the RBI Act, 1934 empowers the RBI to include banks in, or exclude them from, the Second Schedule by Gazette notification.
  • Scheduled banks must maintain the cash reserve ratio as balances with the RBI under Section 42(1) of the RBI Act, 1934.
  • Payments banks, licensed under RBI guidelines of 2014, accept deposits and provide payments and remittance services but cannot lend or issue credit cards.
  • The payments bank model was recommended by the RBI's Nachiket Mor Committee on comprehensive financial services for small businesses and low-income households.
  • The RBI cancelled PPBL's banking licence in April 2026; the Delhi High Court then ordered the bank to be wound up.

Practise a UPSC-style question

With reference to the Second Schedule to the Reserve Bank of India Act, 1934, consider the following statements:

1. A bank included in the Second Schedule is known as a scheduled bank.

2. The RBI can include a bank in, or exclude it from, the Schedule by notification in the Gazette of India.

3. Banks included in the Schedule must maintain their cash reserve ratio balances with the RBI.

Which of the statements given above is/are correct?

  1. (a) 1 and 2 only
  2. (b) 2 and 3 only
  3. (c) 1 and 3 only
  4. (d) 1, 2 and 3
Show the answer

Answer: (d) 1, 2 and 3

1 is correct: a 'scheduled bank' means a bank included in the Second Schedule. 2 is correct: Section 42(6) of the Act lets the RBI add or remove banks by Gazette notification, the power used to exclude Paytm Payments Bank. 3 is correct: under Section 42(1), scheduled banks keep their cash reserve ratio as balances with the RBI.

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