EPFO Responds: Paytm Payments Bank Restrictions Prompt Halt on Claims Processing

India’s state-run social security fund, the Employees’ Provident Fund Organisation (EPFO), has made a significant decision in response to recent regulatory developments affecting Paytm Payments Bank. As of February 23, the EPFO will halt the processing of claims made via Paytm Payments Bank accounts. This move comes in the wake of restrictions imposed on Paytm Payments Bank by the Reserve Bank of India (RBI), stemming from persistent irregularities and non-compliance with regulatory standards.

The decision was formalized through a government order, which Reuters had the opportunity to review. According to this order, EPFO officials have been directed to refrain from accepting and processing claims associated with accounts held at Paytm Payments Bank, an affiliate of One 97 Communications.

The EPFO operates under the purview of India’s Ministry of Labour and Employment, thereby making this directive a significant regulatory response within the country’s financial ecosystem.

The regulatory actions against Paytm Payments Bank were initiated by the RBI, which directed the bank to cease accepting new deposits into its accounts or digital wallets starting March. The RBI’s decision, based on supervisory concerns and observed non-compliance with regulatory directives, underscored the need for corrective measures within the banking sector.

It’s noteworthy that the EPFO had previously granted Paytm Payments Bank the authorization to process claims, a privilege extended as recently as November 2023. However, the evolving regulatory landscape and the RBI’s intervention have prompted a reevaluation of this arrangement, leading to the suspension of services involving Paytm Payments Bank accounts within the EPFO framework.

With a formidable corpus exceeding 18 trillion rupees ($216.89 billion) and a coverage extending to nearly 300 million workers, the EPFO plays a crucial role in India’s social security infrastructure. Beyond managing provident funds, the EPFO also oversees pension funds for workers across various sectors.

In light of these recent developments, the suspension of claims processing via Paytm Payments Bank marks a pivotal moment in the ongoing efforts to ensure regulatory compliance and maintain the integrity of India’s financial systems. As stakeholders navigate these changes, the focus remains on safeguarding the interests of workers and maintaining the stability of the social security framework.