FinTech companies not exempt from oversight amid Paytm crisis, says Rajeev Chandrasekhar

The ongoing crisis surrounding Paytm has drawn sharp attention from the Minister for State for Electronics and Information Technology (MeitY), Rajeev Chandrasekhar, who emphasised that regulatory oversight applies to all, regardless of their status as financial technology (FinTech) entities.

Chandrasekhar's remarks, made on Saturday, come in the wake of stringent actions taken by the Reserve Bank of India (RBI) against Paytm Payments Bank, citing significant breaches of regulatory standards and compliance protocols.

Speaking at the launch of Digital India Future Labs in New Delhi, Chandrasekhar asserted, "A sectoral regulator has absolute authority to regulate every entity within the sector. The RBI has exercised this authority, and it falls well within their purview." He underlined that operating as a FinTech or tech company does not exempt any entity from regulatory scrutiny.

The RBI's crackdown on Paytm Payments Bank has resulted in severe limitations, with the platform barred from accepting fresh deposits and conducting credit transactions beyond February 29, 2024. Paytm, however, is actively working on its appeal to extend this deadline.

Investigations by the RBI have revealed grave irregularities in the Know Your Customer (KYC) processes of numerous Paytm Payments Bank customers, raising concerns of potential data misuse and money laundering. The absence of proper KYC compliance for a substantial number of users, estimated to be in the hundreds of thousands, has led to significant breaches of RBI regulations. Speculation is now rife that Paytm Payments Bank could face permanent suspension following the February 29 deadline.

Despite the looming deadline and regulatory scrutiny, Paytm founder Vijay Shekhar Sharma has reassured users that the Paytm app will continue to operate without disruption. In a post on X, Sharma affirmed, "To every Paytmer, Your favourite app is working, will keep working beyond 29 February as usual." He expressed gratitude for the unwavering support and pledged the company's commitment to serving the nation in full compliance with regulations.

Paytm Payments Bank, which operates under restricted banking guidelines, holds the majority stake owned by billionaire Vijay Shekhar Sharma, with Paytm parent company One 97 Communications Ltd. retaining the remainder.