Paytm's Sharma knocks doors at Mint Road, North Block

New Delhi/Mumbai: Paytm founder Vijay Shekhar Sharma on Tuesday met finance minister Nirmala Sitharaman, days after the Reserve Bank of India (RBI) barred Paytm Payments Bank from accepting fresh deposits starting March due to serious regulatory violations, two people with direct knowledge of the matter told Mint.

Sitharaman met Sharma out of courtesy for the industry, the first person mentioned above said, requesting anonymity. “The FM made it clear that it was a regulatory issue, which the government can’t help the company with,” the person said.

When contacted, a finance ministry spokesperson refused to comment.

Earlier on Monday, Sharma, the founder and chief executive of One97 Communications, the parent of the payments bank, met officials from RBI, according to a person aware of the development.

Sharma, the person said, wanted to understand the way forward following RBI’s decision to bar the payments bank from accepting deposits beginning 1 March. According to the person cited above, an emotional Sharma left without any change in stance from the banking regulator.

Some entrepreneurs have written to RBI governor Shaktikanta Das and finance minister Nirmala Sitharaman, requesting them to reconsider the restrictions, the Economic Times reported on Tuesday. Following the RBI action, several startup founders have rallied behind Paytm, saying that such regulatory measures could sound the death knell for fintechs. “RBI’s action is not against the fintech community. It is against a specific company that did not follow the norms and failed to make amends despite repeated caution,” said the person cited above.

An email sent to Paytm Payments Bank remained unanswered till press time.

Mint reported on Saturday that the RBI’s 31 January crackdown was a result of four primary issues at Paytm Payments Bank. First, the bank falsified compliance on issues pointed out by the regulator, meaning it claimed to have rectified the flaws without actually doing so.

Second, Paytm Payments Bank did not conduct KYC for a significant section of its customers, and there were instances of a single PAN (permanent account number)—an identity document issued by the income tax department—being linked to hundreds of customers. Third, the non-financial and financial businesses of the payments bank were closely intertwined with that of the promoter group of companies. Fourth, the lender is said to have not disclosed payables to its parent entity One97 Communications Ltd.

Shares of One97 Communications fell 42% over three days after RBI prohibited it from most banking activities. But they recovered 3% to ₹451.6 apiece on the BSE on Tuesday after clarifications late on Monday that neither the parent nor the bank was being investigated for violation of foreign exchange rules. On Tuesday, it also denied news reports that it was looking to sell its wallet business to HDFC Bank and Jio Financial Services.