We will always have KRA to ensure things are validated, otherwise one mischievous player can contaminate the whole system, said Puri Buch
KRA provides for centralised storage and digitisation of the KYC records in the securities market
Buch’s criticism of Paytm came in the backdrop of RBI, earlier this year, crackdown cracking down on Paytm Payments Bank for flouting KYC norms
SEBI chairperson Madhavi Puri Buch said that the markets regulator will ensure adequate oversight to prevent a “Paytm-type contamination”.
“We will not allow a Paytm-type of contamination in our market. We all saw what happened in Paytm. Now, because in the banking system, there is no KRA (KYC Registration Agency) type system. So, the problem of Paytm
stays in Paytm. It doesn’t contaminate other banks,” Buch said.
It is pertinent to note that SEBI mandates uniform KYC by all SEBI-registered intermediaries. KRA provides for centralised storage/ digitisation of the KYC records in the securities market.
“But if we allow Paytm to come into our system with no KRA, and it contaminates the whole system, how can we allow that? We will always have our KRA sitting in the middle to make sure things are validated, otherwise you can have one mischievous player come in and contaminate the whole system. We will not allow that,” the SEBI chairperson added.
Buch’s sharp criticism of Paytm came in the backdrop of the Reserve Bank of India’s crackdown on Paytm Payments Bank Ltd (PPBL) for flouting KYC norms and non-compliance with rules. The central bank ordered a number of restrictions on PPBL, including barring it from taking deposits or credit transactions or top ups in any customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Cards.
At the time, a number of reports said that the RBI took the action against Paytm due to lapses in its KYC processes.
However, Paytm’s troubles didn’t end with the RBI’s actions. In March, the Financial Intelligence Unit-India (FIU-IND) also slapped PPBL with a fine of INR 5.49 Cr for skirting anti-money laundering laws.
According to the finance ministry, PPBL allowed some entities to route illegal activities’ proceeds through its accounts.
Besides, Paytm has also been under SEBI’s scrutiny. It received a show cause notice from market regulator SEBI in relation to the 2.1 Cr employee stock options (ESOP) granted to the company’s founder and CEO Vijay Shekhar Sharma in the fiscal year ended March 2022 (FY22).
Earlier this month, Paytm also got an administrative warning letter from SEBI over related party transactions with PPBL in FY22, which were conducted without due approval of either the audit committee or the shareholders.
