Paytm Crisis: Founders Urge RBI to Reevaluate Restrictions, Citing Potential Impact on Fintech Ecosystem and Economy.
In response to the regulatory action taken against Paytm Payments Bank by the Reserve Bank of India (RBI), a group of startup founders, including those unrelated to Paytm, have penned a letter to RBI Governor Shaktikanta Das and Finance Minister Nirmala Sitharaman.
The founders are urging a reconsideration of the regulatory measures imposed on Paytm’s payments bank unit, which includes the immediate cessation of onboarding new customers and the closure of key banking services after February 29.
As reported by The Economic Times, a letter signed by startup founders including Yashish Dahiya from Policybazaar, Rajesh Magow from MakeMyTrip, Murugavel Janakiraman from Bharat Matrimony, and Ritesh Malik from Innov8 expresses concerns about the regulatory action taken against Paytm Payments Bank. The founders argue that the repercussions of such actions extend beyond Paytm and could significantly impact the broader ecosystem.
The group of startup founders has urged the Reserve Bank of India (RBI) to reevaluate the “proportionality of restrictions” imposed on Paytm Payments Bank. They emphasize the potential impact not only on Paytm but also on the wider fintech ecosystem and the broader economy. Additionally, the founders have requested a “clear and practical window” for Paytm to address any deficiencies and showcase compliance, indicating a collaborative approach to rectify concerns while minimizing adverse consequences.
On January 31, the Reserve Bank of India (RBI) issued a directive to Paytm Payments Bank instructing the cessation of onboarding new customers. This action was taken citing “persistent non-compliances and continued material supervisory concerns in the bank.” Additionally, Paytm Payments Bank has been directed to halt various financial activities, including further deposits, transactions, top-ups in customer accounts, and services related to wallets, FASTags, prepaid instruments, NCMC cards, among others.
Despite the regulatory actions against Paytm Payments Bank, the Reserve Bank of India (RBI) has assured customers with available balances that they can withdraw or utilize the funds without any restrictions. Furthermore, Paytm’s parent company, One97 Communications, has clarified that neither the company nor its founder, Vijay Shekhar Sharma, is under investigation by the Enforcement Directorate.
The clarification extends to FEMA violations, as the company asserts that it is not being probed for such offenses. Notably, Paytm’s shares have experienced a 43% decline in the past three sessions, prompting a reduction in the price band limit from 20% to 10%.
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