Challenges continue to mount for Paytm, India’s fintech giant, with no immediate relief in sight. Despite the company’s attempts to appease the Reserve Bank of India (RBI), Governor Shaktikanta Das has declared “hardly any room for review” regarding the recent curbs placed on its banking unit, Paytm Payments Bank. This leaves Paytm’s future hanging in the balance, amidst questions about its compliance and potential license revocation.
Speaking to reporters in Delhi on Monday, Das underlined the gravity of the situation and hinted at stringent actions ahead.
The crux of the issue lies in the RBI’s concerns about “persistent non-compliance” by Paytm Payments Bank, particularly regarding “questionable transactions” between the bank and the widely used payment app. Despite multiple warnings and two years of regulatory scrutiny, Paytm seems to have fallen short of the RBI’s standards. Governor Das emphasized the thorough assessment undertaken before taking action, suggesting the company’s attempts at appeasement, including the recent establishment of a compliance committee, might be falling on deaf ears.
The central bank is expected to release more details in upcoming FAQs (Frequently Asked Questions), but its firm stance suggests no immediate relief for Paytm.
“When constructive engagement doesn’t work or when the regulated entity does not take effective action, we go for imposing business restrictions. Actions are proportionate to the gravity of the situation,” said Shaktikanta Das.
Bloomberg reports that the RBI might revoke Paytm’s banking license as early as March. This would be a major blow, potentially impacting millions of users and raising concerns about the company’s long-term viability.
Though specifics remain unclear, the RBI deputy governor assures “suitable steps” to minimize customer inconvenience. This could involve facilitating transfers to other banks or ensuring smooth operations till an alternative is found.
Paytm’s Defense
Paytm has not completely ruled out the possibility of redeeming itself. The recently established compliance committee, comprising renowned personalities, is a step in the right direction to address the RBI’s concerns. Meleveetil Damodaran, a seasoned financial expert and former head of the Securities Exchange Board of India (SEBI), will spearhead the advisory committee. The three-member panel also includes Mukund Manohar Chitale, a former president of the Institute of Chartered Accountants of India (ICAI), and Ramachandran Rajaraman, a former Chairman and Managing Director of Andhra Bank.
In addition to these developments, One97 Communications has already announced its plans to expand its partnership with third-party banks, aiming to sustain and extend its range of banking services.
Regaining the RBI’s trust and securing customer confidence is paramount for One97 Communications (NSE: PAYTM) in its ongoing operation of Paytm and associated banking services in India. Investors are likely to remain cautious, awaiting further developments. This saga involving the RBI ban on Paytm Payments Bank highlights the importance of stringent compliance for fintech companies operating in a highly regulated environment.
