PayTM action proportionate to gravity of situation: RBI governor
Flooded with queries about a possible systemic failure, action taken and its impact, the central bank has decided to issue FAQ’s on PayTM next week
In response to a surge in queries regarding PayTM, the Reserve Bank of India (RBI) has announced plans to address the concerns through a forthcoming release of frequently asked questions (FAQs) next week.
RBI governor Shaktikanta Das addressed the matter during a press conference, affirming that PayTM had been afforded ample time to address the regulatory concerns raised by the central bank. There are no systemic concerns prompting the action on Paytm; rather, the decision is a result of persistent non-compliance on the part of the company.
“We are a responsible regulator,” Das said, emphasising the diligence with which the RBI approached regulatory matters. He questioned the necessity of regulatory intervention if all compliance requirements had been met, underscoring the gravity of the situation that prompted the RBI's actions. The governor refrained from specifying the precise shortcomings that led to the RBI's action against PayTM, but unequivocally stated that it stemmed from a "lack of compliance" on PayTM's part.
Addressing a press conference at the RBI headquarters in Mumbai on 8 February, Das was faced with a barrage of questions pertaining to PayTM. Taking on a query regarding the RBI's decision of not appointing a director of its choice in PayTM to ensure compliance, Das highlighted the diverse regulatory tools available to the central bank.
He also emphasised the importance of bilateral engagement in nudging entities towards corrective action, suggesting that strong regulatory measures were employed only when deemed necessary.
Das further clarified that the restrictions imposed on PayTM were proportional to the severity of the situation, with the primary objective being the preservation of systemic stability and safeguarding customer interests. The RBI's actions against PayTM underscore its commitment to maintaining the integrity and stability of the financial system while ensuring regulatory compliance within the banking sector.
The central bank had announced strict measures against Paytm Payments Bank Ltd (PPBL) due to concerns over compliance and supervision. Under the authority granted by section 35A of the Banking Regulation Act 1949, the RBI has imposed stringent restrictions on PPBL's operations, with a specific focus on new deposits and credit transactions. This decision follows a directive issued on 11 March 2022, instructing PPBL to suspend the onboarding of new customers.
Reports stemming from comprehensive audits and compliance validations conducted by external auditors have revealed persistent non-compliance and significant supervisory concerns within PPBL. Consequently, the RBI has escalated its regulatory oversight, prompting the imposition of stricter measures.