RBI Governor Shaktikanta Das said that Paytm flaunted regulatory guidelines and failed to comply which ultimately led to the stern action against the fintech.
PayTM Case: The Reserve Bank Of India (RBI) Thursday revealed that the action against PayTM came due to the fintech’s “persistent non-compliance” with the regulatory guidelines and asserted that there was no systemic threat at the moment as the case pertains to a single entity, not a widespread phenomenon.
No systemic threat
RBI Governor Shaktikanta Das clarified that Paytm’s lack of compliance to regulations does not pose a systemic threat. He said that Paytm flaunted regulatory guidelines and failed to comply despite despite nudges over a period of time which ultimately led to the stern action against the fintech.
“There is no worry about the system at the moment. Here we are talking about a specific institution, a specific payment bank,” Das told reporters at the central bank headquarters in Mumbai at the customary post-policy media briefing.
Deputy Governor Swaminathan J revealed that the January 31 action against Paytm Payments Bank, wherein the RBI has barred it from onboarding new customers, and asked to stop services related to deposits, prepaid instruments and e-wallet after February 29, was the culmination of a long series of bilateral engagement.
“This is a supervisory action on a regulated entity for persistent non-compliance. Such supervisory actions are invariably preceded by months and at times years of bilateral engagement, where we not only point out deficiencies but also provide more than adequate time for them to take corrective action,” the commercial banker-turned-regulator said.
PayTM didn’t comply despite ‘nudges’
Without disclosing specific details of what led to the action against Paytm, Das said it starts with “nudges” from the regulator for corrective action and sometimes the RBI may give more than sufficient time to an entity to comply, and it is lack of compliance which ultimately leads to the business restrictions order.
The proportionality aspect is taken into consideration before imposing any restriction, Das said, adding, “all our actions are in the best interest of systemic stability and protection of depositors or customers’ interest.
“These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success.”.
Detailed FAQ soon
Earlier in the day, the RBI Governor stressed on “good governance, robust risk management, sound compliance culture and protection of customers’ interest” being of paramount importance for the Reserve Bank.
Das said there are a lot of questions and concerns in the minds of people, and the Reserve Bank will be coming out with a detailed FAQ (frequently asked questions) next week which will make things clear.
Asked about the decision to impose the rather strong action of business restrictions, without going for other alternatives like appointing a director on the board as it has done in some cases in the recent past, Swaminathan said an “one size fits all kind of solution may not work in such situations”.
“As a regulator, it’s incumbent upon us to protect the interests of the ultimate consumer and thereby protecting the stability of the financial system,” Swaminathan said.
He was tightlipped about the future course of action, but promised that customers’ inconvenience will be minimized.
KYC concerns
When asked about the reasons for the action, specifically if it has been triggered by the ownership structure at Paytm or if it is limited to KYC concerns, Das declined to reveal anything about the “bilateral engagements”.
“The regulations are robust. It is not a case where there was a regulatory deficiency or there was a regulatory correction required. It’s an issue of compliance, compliance with various parameters,” he said.
(With inputs from agencies)