The Reserve Bank of India’s disciplinary action against the banking segment of fintech major Paytm will make the fintech firms focus on legal compliance, Union Minister Rajeev Chandrasekhar said. The minister noted that this incidence will help the firms understand the necessity of complying with the laws.
Speaking in an interview with PTI, Chandrasekhar added, “Regulatory compliance cannot be optional for companies, rather it is an aspect every entrepreneur must pay full attention to. The issue of Paytm Payments Bank is a case where a hard-charging and aggressive entrepreneur has failed to realise the need for regulatory compliance, and that no company can get away if it is non-compliant with law. Any company, be it from India or abroad, big or small, has to abide by the law of the land.”
Notably, the banking regulator restricted PPBL from allowing customers to deposit cash or top-ups in Paytm wallet, FASTags, and other instruments associated with the lender after March 15, 2024. The Minister of State for Electronics and IT said that the decision has helped the fintech industry understand the importance of compliance.
He stated that the central bank’s decision has not rattled fintech and called the term an incorrect characterisation. “And this notion that RBI… the regulator’s action against Paytm Payments Bank has rattled fintech is… I don’t think that’s a correct characterisation. I think it has drawn the attention of fintech entrepreneurs, to the fact that you also have to know how to comply with the law. Regulatory compliance is not an optional thing for any country in the world, certainly not in India, and it is something that they (entrepreneurs) should pay more attention to. Entrepreneurs typically tend to get so sharply focused on what they’re building, that at times, they may lose sight of rules that have been laid down by regulators,” he added.
One97 Communications Ltd is the parent company of Paytm. PPBL is registered as an associate of the firm, with the company holding a stake of 49 per cent in the banking business. The remaining 51 per cent share lies with Paytm founder and CEO, Vijay Shekhar Sharma.
The banking regulator earlier noted that the decision against PPBL has been taken due to repeated non-compliances and violation of know your customer (KYC) norms. The bank also issued a list of frequently asked questions (FAQs) on the matter to help customers get clarity on the issue. It stated that Paytm QR code, Soundbox, and POS terminal would continue to function normally after the deadline as long as it is lined to other banks apart from PPBL.
One97 Communications also said earlier that it has shifted its nodal account to Axis Bank from Paytm Payments Bank. The nodal account acts as a master account in which all the customers, merchant transactions are settled.
Sharing his experience as an entrepreneur, Chandrasekhar noted, “Entrepreneurs and startups have a ‘genetic flaw’ that they get focused on what they’re building and sometimes forget to understand there are some rules that have been laid down by the regulators. So I will put this down to that type of an error where a hard-charging entrepreneur, believes in himself, is building a company successfully (but) fails to realise that there are some regulatory do’s and don’ts and there can never be a situation whether it’s a social media company, or a fintech company, where somebody is not compliant with the law and expects to get away with it.”
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