Paytm Crisis: Action was taken after persistent non-compliance, says RBI Deputy Guv Swaminathan

Commenting on the Paytm Crisis that broke out last month, the Reserve Bank of India (RBI) deputy Governor Swaminathan Janakiraman on Thursday said that this is a regulatory/supervisory action.

“We provide the company enough time to take corrective measures,” he said, adding that the action was taken after persistent non-compliance.

The central bank’s Governor Shaktikanta Das said that he doesn’t want to comment on any particular entity. However, he noted that the RBI, sometimes, gives more than sufficient time to comply.

“There is no worry about the (financial) system at the moment,” Das said.

The Governor also made some general observations on regulating entities, including RBI’s deepened supervisory approach and methods over last few years.

“Our emphasis is always on bilateral engagement with regulated entities with focus on nudging the REs to take corrective actions and sufficient time is given for undertaking such corrective actions. When constructive engagement does not work or REs do not act, we go for supervisory or business restrictions,” Das noted.

The apex bank chief noted that such restrictions are proportionate to the gravity of the situation.

“All our actions being a responsible supervisor are in the best interest if systemic stability and in the best interest of customer’s interest. We will be issuing FAQ next week to address all questions,” Das said.

The Paytm Saga began when the RBI on January 31 directed Paytm Payments Bank to stop all forms of banking services — including accepting deposits and processing of payments — effective February 29.

The disciplinary action is seen as unprecedented for the financial services industry, and will affect the app’s users as well as the wider merchant community that uses the Paytm network for payment processing, wage disbursals and other quasi-banking functions.

Meanwhile, Paytm CEO and Founder Vijay Shekhar Sharma met RBI officials and Finance Minister Nirmala Sitharaman. In the meeting with the FM, Sharma explained the company’s position with regard to the various issues flagged by RBI. Sitharaman is understood to have impressed upon Sharma the need to discuss the matter with the RBI and sort out the non-compliances that have been flagged, ET reported.

One 97 Communications shares were trading at Rs 463.70, down 6.56 per cent as of 11.30 am on Thursday. It is to be noted that as of February 5, the stock has lost 42.4 per cent of its value or Rs 20,500 crore in market capitalisation.