RBI Explains Crackdown on Paytm Payments Bank Amid Regulatory Concerns
| IOP Desk - 08 Feb 2024

IOP News Desk

Mumbai, February 8, 2024- The Reserve Bank of India (RBI) has provided insights into its recent actions against Paytm Payments Bank, shedding light on the underlying regulatory issues that prompted the crackdown.

In a statement reported by Reuters, top officials from the central bank emphasized that the decision to restrict Paytm Payments Bank from accepting new deposits stemmed from the bank's persistent failure to comply with regulations despite prior warnings. RBI Governor Shaktikanta Das, addressing the media following a monetary policy review, underscored the importance of regulated entities adhering to regulatory requirements within stipulated timelines.

Das affirmed that the RBI adopts a collaborative approach, engaging in constructive dialogue with entities to address compliance issues. However, when efforts to rectify non-compliance prove ineffective, the RBI resorts to imposing supervisory or business restrictions. He reiterated the RBI's commitment to responsible regulation, emphasizing that action would not have been taken if all regulatory norms had been observed.

Of particular concern are reports of hundreds of thousands of accounts created at Paytm Payments Bank without proper identification, sparking speculations about potential license cancellations. Paytm, with 330 million digital wallet accounts, plays a pivotal role in India's digital transactions landscape, prompting worries about disruptions following the RBI's directive barring new deposits.

Assuring users and merchant partners, a Paytm spokesperson confirmed the continued operational status of the Paytm app, stating that services remain unaffected. The company is accelerating partnerships with banks to ensure uninterrupted services.

Responding to queries about customer inconvenience, RBI Deputy Governor Swaminathan J assured that measures would be taken to minimize disruptions, though specific details were not disclosed. Paytm management announced plans to collaborate with other banks to maintain service continuity, with Swaminathan emphasizing the importance of partner banks conducting due diligence.

In response to the RBI's remarks, Paytm's shares initially rose but later experienced a decline, trading 10% lower in the afternoon session on the National Stock Exchange.

The RBI has indicated plans to provide further clarifications on the Paytm Payments Bank order through frequently asked questions (FAQs) in the upcoming week, aiming to address lingering uncertainties surrounding the regulatory action.

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