RBI explains why it cracked down on Paytm Payments Bank. Details here
RBI said that the decision to restrict Paytm Payments Bank from accepting new deposits was made after giving the company ample time to rectify its non-compliance issues.
The Reserve Bank of India (RBI) has clarified its recent actions against Paytm Payments Bank, stating that the crackdown was a result of the bank's failure to comply with regulations despite repeated warnings.
The decision to restrict Paytm Payments Bank from accepting new deposits was made after giving the company ample time to rectify its non-compliance issues, news agency Reuters reported.
The RBI highlighted concerns over supervisory matters and violations of regulatory rules, according to top officials from the central bank mentioned in the report.
RBI Governor's statement
RBI Governor Shaktikanta Das, speaking at a press conference following a monetary policy review, outlined that regulated entities are given adequate time to meet regulatory requirements.
He stated that the RBI engages in constructive discussions with companies regarding compliance issues and encourages them to take corrective measures. However, when such efforts prove ineffective, the RBI resorts to imposing supervisory or business restrictions.
Das reiterated that the RBI is a responsible regulator and would not have taken action if all regulatory norms had been followed.
Concerns over unidentified accounts
Additionally, concerns have arisen regarding the creation of hundreds of thousands of accounts at Paytm Payments Bank without proper identification.
There are speculations that the regulatory crackdown could potentially lead to the cancellation of Paytm's licence.
Paytm, with 330 million digital wallet accounts, is widely used in India for various financial transactions. The central bank's directive barring new deposits into Paytm Payments Bank has raised concerns about disruptions to digital payments.
"We assure our users and merchant partners that the Paytm app remains fully operational, and our services are unaffected," a Paytm spokesperson said, adding that the company is accelerating partnerships with banks to offer uninterrupted services.
RBI's assurance on customer convenience
In response to queries about customer inconvenience, RBI Deputy Governor Swaminathan J stated that suitable measures would be taken to minimise any disruptions. However, specific details about these measures were not provided.
Paytm management has announced plans to collaborate with other banks to ensure the continued operation of its digital payment app.
However, Swaminathan highlighted that partnering banks would need to conduct their own due diligence before entering into any agreements with Paytm.
Following the RBI's comments, Paytm's shares experienced a decline, trading 10 per cent lower in the afternoon session, after initially rising by 6 per cent on the National Stock Exchange.
The RBI has indicated that it will release further clarifications regarding the Paytm Payments Bank order in the form of frequently asked questions (FAQs) in the coming week.