‘If Paytm complied with everything, why would RBI act?’

RBI Governor Shaktikanta Das informed that the central bank would release a set of FAQs next week on the actions taken against Paytm Payments Bank. (Photo: PTI)
RBI Governor Shaktikanta Das informed that the central bank would release a set of FAQs next week on the actions taken against Paytm Payments Bank. (Photo: PTI)

Summary

RBI governor Shaktikanta Das said the regulator will continue to encourage and support innovation and technology in the financial sector.

The central bank on Thursday said it imposed restrictions on Paytm Payments Bank because of persistent non-compliance, insisting that it resorted to such measures only after prolonged engagement with the entities involved.

At the central bank’s monetary policy briefing on Thursday, RBI governor Shaktikanta Das and his deputies faced several questions regarding the restrictions on Paytm Payments Bank, an associate company of One97 Communications Ltd.

Their responses were largely accompanied by a disclaimer that such decisions were applicable to all regulated entities, not specifically to Paytm Payments Bank.

“We give sufficient time to every regulated entity that is supervised by RBI to comply with the regulatory requirements... if everything had been complied with, why should we act?," Das said.

He emphasised that RBI supports innovation and technology in the financial sector. After RBI’s action on the payments bank, several startup founders had rallied behind the company, saying such regulatory measures could sound the death knell for fintech startups.

Citing a statement by RBI deputy governor Swaminathan J that the restrictions on the payments bank did not apply to the Paytm app, a spokesperson for the company said the app remained fully operational and its services were unaffected.

“We assure our merchant partners that Paytm QR, Soundbox and card machines will continue to work as always," the spokesperson said.

On 31 January, RBI barred Paytm Payments Bank from accepting customer deposits after 29 February following an audit that revealed “persistent non-compliances" and “continued material supervisory concerns".

Following the decision, Paytm founder Vijay Shekhar Sharma met both RBI officials as well as finance minister Nirmala Sitharaman earlier this week. The finance minister, however, made it clear that the government couldn’t help the company with what is essentially a regulatory issue, Mint reported citing a person familiar with the development.

On Thursday, RBI said it would issue answers to a set of frequently asked questions next week on the Paytm Payments Bank matter.

The regulatory curb came almost two years after the payments bank was restricted from onboarding new customers.

“There is no worry about the system… I would like to make some general observations which include all our regulated entities," said Das, laying down several points related to compliance in regulated entities and how the central bank deals with instances of deviation.

Over the last few years, Das said, RBI had deepened its supervisory systems, approaches, and methods, but added that “sufficient time is given [to companies] to undertake such corrective action."

RBI’s actions, Das said, are in the best interest of systemic stability and protection of depositors’ or customers’ interests.

“These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success."

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