SUMMARY
A top government official said that the matter between the RBI and Paytm Payments Bank has to be resolved at the level of the central bank,
Paytm Payments Bank is a small bank and poses no systemic risks to financial stability, said financial services secretary Vivek Joshi
Late last month, the RBI barred Paytm Payments Bank from offering any banking services after February 29
A senior official in the Ministry of Finance has reportedly termed the Reserve Bank of India’s (RBI’s) crackdown on Paytm Payments Bank in the interest of consumers and the Indian economy.
Speaking to Moneycontrol, financial services secretary Vivek Joshi said that the action taken by the RBI is well within its purview. He added that the matter has to be resolved at the level of the central bank and the government has had ‘nothing to do until now’.
“What can I say about Paytm. It is an action taken by the regulator. They regulate the banks… The government has had nothing to do until now when it comes to the actions taken on Paytm. And we believe that the RBI must have taken the action in the overall interest of the consumer and the economy,” said Joshi.
Speaking about the implications which the restrictions on the payments bank would have on financial stability, Joshi said Paytm Payments Bank is a small bank and poses no systemic risks.
This comes a day after Paytm founder and chief executive officer (CEO) Vijay Shekhar Sharma met finance minister Nirmala Sitharaman and discussed issues related to the central bank’s recent directives.
As per the report, Joshi was also present at the meeting. He, however, didn’t divulge any details about what transpired at the meeting.
“I was there in the meeting yesterday with the finance minister. But I can’t reveal what was discussed as it is privileged information. The sum and substance is that you (Paytm) have to deal with the regulator,” he added.
In a separate chat with The Economic Times, Joshi said that the fintech major had not complied with the regulator’s mandates, adding that companies will have to follow the laws of the land.
Meanwhile, the central bank is now likely to issue a clarification on the ongoing crisis at Paytm considering the fintech major’s large user base. Alongside, the Enforcement Directorate (ED) and the Ministry of Finance’s financial intelligence unit (FIU) have asked the central bank to share their report on the recent action against Paytm Payments Bank.
Paytm Payments Bank was pushed into uncharted waters late last month after the RBI barred it from taking any deposits or credit transactions or top-ups in any of its customer accounts. It also prohibited the company from offering any other banking services, such as UPI facility and fund transfers, after February 29.
Immediately after the announcement, Paytm’s stock nosedived and hit the lower circuit for three consecutive trading sessions. However, investors’ fears eased as CEO Sharma began meeting top government functionaries to pitch his case for the extension of the deadline and more clarity on the transfer of Paytm’s licence for the wallets business.
A day after meeting the FM, Paytm bounced back strongly and hit the upper circuit on Wednesday (February 7), closing the day 10% higher at INR 496.75 on the BSE.
Meanwhile, a clutch of Indian startup founders have lent support to Sharma. Names such as Matrimony’s Murugavel Janakiraman, Ritesh Malik of Innov8, PB Fintech’s Yashish Dahiya, and others wrote a letter to Prime Minister Narendra Modi, FM Sitharaman and RBI governor Shaktikanta Das, urging them to reconsider RBI’s directives.
