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The Reserve Bank of India (RBI) on Friday issued a notice to Paytm Payments Bank forbidding it to onboard any new customers, effective immediately.

The Central Bank also directed the bank to appoint an information technology audit firm to conduct an audit of its IT system and said it will lift the embargo after reviewing the report of the IT auditors.

The action, RBI said, was based on “certain material supervisory concerns” observed at Paytm Payments Bank.

“Reserve Bank of India has today, in exercise of its powers, inter alia, under section 35A of the Banking Regulation Act, 1949, directed Paytm Payments Bank Ltd to stop, with immediate effect, onboarding of new customers. The bank has also been directed to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system,” the circular read.

“Onboarding of new customers by Paytm Payments Bank Ltd will be subject to specific permission to be granted by RBI after reviewing the report of the IT auditors,” it added.

Paytm started operations of its Paytm Payments Bank in 2017 and has been gunning to apply for a small bank finance licence.

Last year, the RBI imposed a monetary penalty on Paytm Payments Bank for submitting information that did not reflect its actual position in its application to the banking authority for the issue of a Certificate of Authorisation (CoA).