Vijay Shekhar Sharma, chief executive officer of Paytm, told CNBC-TV18 on Monday that none of the bank's servers is placed anywhere outside the country and no data of customers have been compromised.
Without detailing the contents of the RBI concerns, Sharma clarified that no fine had been levied for Know-Your-Customer (KYC) compliance and no issues were raised with the bank ownership structure.
"Concerns are IT related. They want systems to be audited by a third party and confirmed to them. RBI concern does not include any sort of issues over data access," Sharma said.
"Paytm has always been vocal about keeping systems in the country. We have no server of the bank that is not in India. No foreign national has any access to our servers," he said while calling out some reports on RBI's inputs.
The RBI has asked for some upgrades, updates in processes, and compliance and the bank is working on the same and the information would be shared with the regulator within the timeframe set by it.
"There are some concerns that the regulator has pointed out. RBI has suggested we sort certain line items. We have some work to do regarding these line items," Sharma said.
On small finance bank, Sharma said: "Small finance bank will only happen when we become eligible."
Paytm parent One97 Communications' shares hit a fresh low on Monday after the RBI barred the company's payments bank, Paytm Payments Bank, from opening new accounts citing "material supervisory concerns".
Paytm shares fell as much as 13.3 percent to an all-time low of Rs 672.1 on BSE, a discount of 68.7 percent below its issue price of Rs 2,150. Prior to Monday's fall, the stock had hit an all-time low of Rs 728.5 on March 8.
Paytm Payments Bank said it is taking immediate actions to comply with the RBI's direction, and that its existing customers can continue to operate banking and digital payments services without interruption.
This is the third time One97's payments banking unit is facing action from the banking regulator since its inception in May 2017.
Paytm shares have suffered a series of losses since listing on stock exchanges BSE and NSE in mid-November at a discount of around nine percent to the issue price. Its IPO - the biggest of all time in India - saw an overall booking of 1.9 times the shares on offer, failing to win the kind of investor interest enjoyed by most IPOs in 2021.