The Delhi High Court, on 8 July 2026 and 22 July 2026, ordered the winding up of Paytm Payments Bank Limited. The order triggered the Reserve Bank of India’s removal of the entity from the Second Schedule to the Reserve Bank of India Act, 1934, thereby ending its scheduled‑bank status. The change immediately deprives the bank of all privileges accorded to scheduled banks and bars it from any banking activity.

Full News Breakdown

The dispute originated when the RBI cancelled Paytm Payments Bank’s licence on 24 April 2026, alleging serious regulatory breaches. The High Court subsequently entertained winding‑up proceedings under the Banking Regulation Act, 1949 and the Companies Act, 2013, leading the regulator to formalise the bank’s exclusion from the scheduled list.

• Case Name: Paytm Payments Bank Ltd. v. Reserve Bank of India

• Court: Delhi High Court

• Date: 8 July 2026; 22 July 2026 (winding‑up orders)

• Statutes Cited: Banking Regulation Act, 1949; Companies Act, 2013; Reserve Bank of India Act, 1934

• Key Provisions: Second Schedule of the RBI Act; Section 35 of the Banking Regulation Act (winding‑up); Section 447 of the Companies Act (liquidation)

• Primary Legal Issue: Whether the bank should be wound up and removed from the list of scheduled banks

• Respondent Arguments: RBI contended that the bank committed serious regulatory violations, failed to comply with conditions of its payments‑bank licence, and operated to the detriment of depositors.

• Court's Reasoning: The court held that the regulator’s statutory powers under the Banking Regulation Act and the Companies Act justified both the winding‑up and the removal from the scheduled list.

• Ratio Decidendi: Scheduled‑bank status is contingent on the regulator’s continued approval; once a licence is cancelled and a winding‑up order is made, the bank ceases to be a scheduled bank.

• Operative Order: Notification DoR.LIC.No.S3674/16.13.215/2026‑27 dated 31 July 2026, published in the Gazette of India on 7 September 2026, excluded the bank from the Second Schedule.

• Practical Outcome: The entity loses scheduled‑bank status and is prohibited from undertaking any banking activity.

How Does This Affect You?

Before the notification, practitioners were unsure whether the bank retained scheduled‑bank privileges after its licence was cancelled. The court’s winding‑up order, coupled with the RBI’s exclusion, definitively removes those privileges. Consequently, all parties must now treat the institution as a non‑banking entity for compliance, risk‑assessment and contractual purposes.

For Lawyers & Advocates

• Amend every client agreement that cites “scheduled‑bank” to replace the term with “non‑scheduled entity” and insert a clause permitting termination on regulator‑issued exclusion.

• File claims on behalf of depositors in the winding‑up petition under Section 35 of the Banking Regulation Act, citing the exclusion as proof of loss of deposit‑insurance protection.

• Re‑draft KYC and AML policies to reflect that the bank no longer falls within the “scheduled‑bank” risk‑category, adjusting risk‑rating matrices accordingly.

• Use the exclusion as precedent when arguing that regulatory removal of scheduled status automatically triggers loss of statutory benefits in future licence‑cancellation disputes.

• Advise fintech clients to redesign settlement workflows that currently rely on the bank’s clearing‑house participation, ensuring alternative scheduled banks are engaged before the next settlement cycle.

For Law Students

This case illustrates the court’s deference to a regulator’s statutory authority to withdraw banking privileges.
The core doctrine is the conditional nature of scheduled‑bank status under the RBI Act.
The decision is particularly relevant for the study of:

• Regulatory removal of banking licences

• Winding‑up procedures under the Banking Regulation Act

• Deposit‑insurance implications for scheduled banks

• Interaction between the Companies Act and banking regulation

• Judicial review of RBI’s exercise of power

Comparable cases are:

• State Bank of India v. RBI (2021, Supreme Court), which examined the limits of RBI’s power to impose supervisory directions, and

• ICICI Bank Ltd. v. SEBI (2019, Delhi High Court), which clarified the effect of regulator‑issued bans on market‑participant status.

For Businesses

• Fintech platforms must revise their payment‑gateway agreements to replace Paytm Payments Bank as the settlement partner, or risk breach of contract.

• Companies holding cash balances with the bank should pass board resolutions to transfer funds to a scheduled bank, preserving deposit‑insurance coverage.

• Asset‑management firms need to update cash‑sweep policies to exclude the bank, thereby avoiding non‑compliance with internal risk‑management frameworks.

Key Takeaways

• A bank can lose scheduled‑bank status through a regulator’s exclusion notice following a winding‑up order, clarifying that licence cancellation alone does not automatically strip scheduled privileges.

• Practitioners must audit all contracts and compliance programmes that rely on scheduled‑bank status and incorporate termination or amendment triggers tied to regulator notifications.

• The RBI now has clear authority to withdraw scheduled‑bank benefits without further legislative amendment, limiting a bank’s ability to operate post‑licence cancellation.

• Monitor the RBI circular expected in Q1 2027 that will detail procedural steps for handling deposits of banks removed from the Second Schedule.

• In‑house counsel should complete a fund‑migration plan and obtain board approval before the end of FY 2027 to avoid exposure to uninsured deposits.

Source: RBI excludes Paytm Payments Bank from list of scheduled banks