A group of Indian startup founders has initiated a plea to the highest government authorities in response to the recent regulatory actions taken by the Reserve Bank of India (RBI) against Paytm Payments Bank.
On February 6, the startup founders wrote to the Prime Minister’s Office (PMO), the Finance Ministry, and the RBI, urging them to reconsider the restrictions imposed on the fintech entity led by Vijay Shekhar Sharma, reported CNBC-TV18.
The letter, likely endorsed by founders representing prominent startups such as Innov8, CapitalMind, and Bharat Matrimony, among others, highlights the potential repercussions of the RBI’s actions on Paytm Payments Bank. These founders emphasised that the regulatory intervention could have far-reaching implications for the entire fintech ecosystem in India.
On 31st January 2024, the reserve bank issued a press release stating that “Action against Paytm Payments Bank Ltd under Section 35A of the Banking Regulation Act, 1949”. The RBI has completely banned the future actions of Paytm after 29th February 2024. The apex bank has asked the banking company to stop onboarding new customers.
Apart from the press releases, both RBI and Paytm have not spoken a single word on the issue going on. In 11th March 2022, the RBI, vide press release has directed the paytm not to onboard new customers and will be subject to specific permission to be granted by RBI after reviewing report of the IT auditors.
Also, the apex bank directed to appoint an IT audit firm to conduct a comprehensive System Audit of its IT system. Paytm Payments Bank, formed in 2017, currently hosts over 330 million wallet accounts and has 100 million monthly transacting users. Thus, to maintain this ban for a long term by the RBI is not a possible one.
In December 2020, the RBI directed HDFC Bank to cease all launches of its forthcoming digital business initiatives and the acquisition of new credit card customers. This action was prompted by recurrent outages at the bank’s data centre, causing disruptions to its operations. However, in 2022, the RBI removed the ban.
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