Paytm crisis: Speaking on the current Paytm fiasco, Reserve Bank of India Deputy Governor Swaminathan J. said the action was taken against the fintech player after persistent non-compliance.
"We don't want to discuss details of action on Paytm Payments Bank. This is supervisory action for 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. As a regulator, it is incumbent upon us to protect the consumer," RBI Deputy Governor Swaminathan J said at the post-policy press briefing in Mumbai.
Last month, the RBI imposed major restrictions on the operations of Paytm Payments Bank Ltd (PPBL). It has directed Paytm Payments Bank to stop accepting deposits or top-ups in customer accounts, wallets, FASTags, and other instruments after February 29.
The regulator reportedly found major irregularities in KYC, which exposed the customers, depositors and wallet holders to serious risks.
The deputy governor added that the particular actions were preceded by months or years of bilateral engagement and that regulated entities (like Paytm PB) are provided adequate time to take corrective action so as to protect consumers and financial stability of the system.
"This is a regulatory/supervisory action. We provide the company enough time to take corrective measures," Swaminathan said.
RBI Governor Shaktikanta Das also added that the RBI is a responsible regulator and there is no worry about the (financial) system at the moment.
"Let me put the record straight on the Paytm issue. There is no worry about the entire system. It is an issue with a specific institution," RBI Governor Shaktikanta Das said.
He further added: "Our focus is always on engaging with regulated entities bilaterally and we nudge them to take corrective action. We give them sufficient time to take corrective action...Without making any specific references to Paytm, I want to make some general comments about all our regulated entities. One, over the last few years, we have significantly deepened our supervisory approach and methods."
"Over the last few days, we have received a lot of queries. We have noted them down. Based on that, we will be issuing an FAQ sometime next week," the RBI Governor said.
"All our actions are in the best interest of systemic stability and protection of depositors' interests. These aspects cannot be compromised," he added.
Governor Das also noted that the Paytm case is not of regulatory deficiency, but issue of compliance as mentioned by Deputy Governor Swaminathan J. "The regulations are in place. They are robust. It is not a case of regulatory deficiency. It is an issue of compliance with various parameters. I don't want to specify the details," Governor Shaktikanta Das said, while being asked by reporters during the press conferenceaboutthe RBI action against Paytm's banking arm.
Governor Das also noted a few observations in this regard:
1. Over the last few years, we have significantly deepened the supervisory approach and methods. 2. Our emphasis is always on bilateral engagement with regulated entities with a focus on nudging regulated entities (REs) to take corrective actions and sufficient time is given for undertaking such corrective actions. 3. When constructive engagement does not work or REs do not act, we go for supervisory or biz restrictions. 4. Such restrictions are proportionate to the gravity of the situation. 5. All our actions being a responsible supervisor are in the best interest if systemic stability and in the best interest of customer interest. 6. We will be issuing FAQ next week to address all questions. 7. RBI will continue to support innovation and technology.
Earlier it was reported that the RBI found that in many cases, the same PAN was linked to numerous customers. In some cases, it was noted that one PAN was linked to 100 customers, while in some cases to more than 1,000 customers. The total value of transactions, which is in crores, was much beyond the regulatory limits in minimum KYC pre-paid instruments as set by RBI.
Paytm has an expansive network of over 30 million merchants via its platform, with roughly 20 per cent using the services of Paytm Payments Bank Ltd (PPBL) for their financial settlements. Notably, PPBL also acts as the sponsor bank - formally referred to as payment service provider (PSP bank), for a majority of UPI addresses on the Paytm application. This association is visible in the virtual payment address (VPA), which uses "@paytm" in it.
Now before Febuary 29, Paytm now will have to transfer all these accounts to third-party banks for the UPI payments to work seamlessly.
At 1.11 pm, Paytm shares were trading at Rs 457.15 on the BSE, down by almost 10 per cent down from the previous close.
Also read: 'We give sufficient time': Shaktikanta Das' 7-point message to fintechs post Paytm crisis
Also read: Paytm Payments Bank crisis: Separate FAQ to come out on fintechs soon, says RBI Guv