Paytm was given enough time to comply with rules: RBI

The Governor declined to specify the specific shortcomings resulting in the RBI action, but made it clear that it is driven by a "lack of compliance" at Paytm.

New Delhi: Officials of the Reserve Bank of India (RBI) on Thursday said Paytm Payments Bank was given enough time to comply with rules and the curbs were imposed on the company’s businesses due to “persistent non-compliance”.

“Such action is invariably preceded by months and sometimes years of bilateral engagement, where we point out the deficiencies, but also give time to take corrective action,” said RBI deputy governor Swaminathan J.

“As a regulator, it is incumbent upon us to protect the consumer,” Swaminathan said at a press conference on bi-monthly monetary policy.

Speaking at the media conference, RBI Governor Shaktikanta Das said restrictions imposed on Paytm Payments Bank are proportionate to the gravity of the situation.

“Our emphasis is always on bilateral engagement with the regulated entities, with focus on nudging them for corrective action and sufficient time is given for undertaking such corrective action,” Das said, commenting on the general ecosystem.

On January 31, the RBI ordered Paytm Payments Bank to stop accepting fresh deposits in its accounts or its digital wallets effective from March 1, 2024.

The RBI’s clampdown came nearly two years after its direction to Paytm Payments Bank to stop onboarding new customers. Citing “material supervisory concerns” the RBI on March 11, 2022 ordered Paytm Payments Bank to stop onboarding of new customers with immediate effect. External auditors’ report revealed persistent non-compliances and continued material supervisory concerns in the bank, the RBI noted in its statement released on January 31.

Shares of One97 Communications Limited (Paytm), the company that controls 49% stake in Paytm Payments Bank, has crashed by over 40% since the RBI’s action. After two days of relief rally, Paytm shares hit lower circuit again on Thursday.

To address the confusion related to Paytm issue, the RBI will issue an FAQ (frequently asked questions) next week, Das said.

“Over the last few days, we have received a lot of queries, clarifications from various quarters including members of the public,” he said. “So, we have noted all these questions and clarifications which have been sought from us and, based on that, we will be issuing a FAQ sometime next week,” Das added.

However, Das it won’t be appropriate for the central bank to share granular details on the Paytm issue.

The RBI Governor tried to assure other financial technology (Fintech) players saying the “RBI will continue to encourage and support innovation and technology in the financial sector.”

“Let there not be any doubt about the Reserve Bank's commitment to promote fintechs, to promote innovation, to promote technology in the financial system,” Das said.