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Paytm Bank Punished for Sharing Data Abroad, Verification Lapses

  • Founder tells CNBC firm is compliant with data storage rules
  • Paytm shares tumbled as much as 14.7% in Mumbai on Monday
India's Payment Pioneer Paytm Seeks Approval for Up to $2.2 Billion IPO
Photographer: Dhiraj Singh/Bloomberg
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Paytm Payments Bank, which processes transactions for India’s digital payments giant Paytm, was barred from taking on new customers because it violated rules by allowing data to flow to servers abroad and didn’t properly verify its customers, according to a person familiar with the matter.

Annual inspections by the Reserve Bank of India found that the company’s servers were sharing information with China-based entities that indirectly own a stake in Paytm Payments Bank, the person said, asking not to be identified as the details are private. Paytm Payments Bank, being a regulated financial institution, was required to maintain a so-called service level agreement with its technology vendor that would ringfence the entity from its owners, the person said.