MUMBAI: RBI on Thursday indicated there are issues beyond KYC compliance with Paytm Payments Bank and it is unlikely to let it off the hook. The regulator, however, clarified that the restrictions apply to PPBL and the digital wallet but not to the UPI app, which will continue to work seamlessly with other bank accounts even after Feb 29.
Amid numerous questions in the post-monetary policy press conference on the ban on Paytm Payments Bank, RBI governor Shaktikanta Das and deputy governor Swaminathan Janakiraman spoke on the severity of the issues. Around this time, shares of Paytm, which were trading weak, saw a vertical drop after RBI’s stance on the fintech flagship became clear. Paytm’s shares finally closed at the 10% lower circuit of 447.
“The restrictions are always proportionate to the gravity of the situation,” said Das. “It was not a case where there was a regulatory deficiency; it was an issue of compliance with so many aspects to it,” he added. “Our emphasis is always on bilateral engagement with regulated entities, and we are focused on nudging the regulated entity to take corrective action, with sufficient time given for undertaking such corrective action,” said Das. The governor said that when all such constructive engagements failed to work, the central bank was compelled to impose business restrictions.
Janakiraman was even more direct, “This is a supervisory action on the legal entity for persistent non-compliance. The supervisory actions are preceded by months and, at times, years of bilateral engagement, where we have pointed out inadequacies and provided them with enough time to take corrective action,” said Janakiraman.
Meanwhile, a Paytm spokesperson said that the app (owned by One97 Communications) is fully operational and its services unaffected. The company said that it is accelerating partnerships with other banks, ensuring that QR, Soundbox, and card machines will continue to function.
Responding to a question on why RBI did not resort to its standard toolkit of superseding the board, Janakiraman said that RBI had various tools and used them based on an assessment of the scale and proportion of the issue, as well as the tool that is needed. “A one-size-fits-all kind of solution may not work in such situations,” he said.
Janakiraman said that as a regulator, it is incumbent upon RBI to protect the consumer’s interest, thereby protecting the financial system’s stability.
“The steps will be taken to ensure that the customer inconvenience, if any, is minimised,” he said. The governor said that while it takes all actions in the best interest of systemic stability and protection of depositors and customers’ interests, there was no worry about the system in the case of Paytm.
Amid numerous questions in the post-monetary policy press conference on the ban on Paytm Payments Bank, RBI governor Shaktikanta Das and deputy governor Swaminathan Janakiraman spoke on the severity of the issues. Around this time, shares of Paytm, which were trading weak, saw a vertical drop after RBI’s stance on the fintech flagship became clear. Paytm’s shares finally closed at the 10% lower circuit of 447.
“The restrictions are always proportionate to the gravity of the situation,” said Das. “It was not a case where there was a regulatory deficiency; it was an issue of compliance with so many aspects to it,” he added. “Our emphasis is always on bilateral engagement with regulated entities, and we are focused on nudging the regulated entity to take corrective action, with sufficient time given for undertaking such corrective action,” said Das. The governor said that when all such constructive engagements failed to work, the central bank was compelled to impose business restrictions.
Janakiraman was even more direct, “This is a supervisory action on the legal entity for persistent non-compliance. The supervisory actions are preceded by months and, at times, years of bilateral engagement, where we have pointed out inadequacies and provided them with enough time to take corrective action,” said Janakiraman.
Meanwhile, a Paytm spokesperson said that the app (owned by One97 Communications) is fully operational and its services unaffected. The company said that it is accelerating partnerships with other banks, ensuring that QR, Soundbox, and card machines will continue to function.
Responding to a question on why RBI did not resort to its standard toolkit of superseding the board, Janakiraman said that RBI had various tools and used them based on an assessment of the scale and proportion of the issue, as well as the tool that is needed. “A one-size-fits-all kind of solution may not work in such situations,” he said.
Janakiraman said that as a regulator, it is incumbent upon RBI to protect the consumer’s interest, thereby protecting the financial system’s stability.
“The steps will be taken to ensure that the customer inconvenience, if any, is minimised,” he said. The governor said that while it takes all actions in the best interest of systemic stability and protection of depositors and customers’ interests, there was no worry about the system in the case of Paytm.