India’s central bank said on Thursday it takes supervisory action and imposes business restrictions only after “persistent non-compliance” with rules, its first comment since last week’s crackdown on Paytm raised existential questions about the future of the leading financial services company. services.
Shaktikanta Das, the governor of the Reserve Bank of India, said the central bank always works with regulated entities bilaterally and pushes them to take corrective action. If the central bank does take action, “it is always commensurate with the gravity of the situation,” Das, pictured above, told a media briefing.
“All our actions, as a responsible regulator, are in the interest of systemic stability and protecting the interests of depositors or clients,” he added.
The Reserve Bank of India has widened its restrictions on Paytm’s Payments Bank, a Paytm affiliate that processes transactions for the financial services group, barring it from offering many banking services, including accepting new deposits and credit transactions on its services.
“This is a supervisory action for persistent non-compliance,” RBI Deputy Governor Swaminathan J said at the media briefing. “Such actions are always preceded by months and sometimes years of bilateral engagement, where we point out the shortcomings but also allow time for corrective measures to be taken. As a regulator, it is up to us to protect the consumer,” he added.
Shares of Paytm fell 10% on Thursday, shrinking its market capitalization to $3.4 billion. Paytm, which went public with a market capitalization of around $20 billion in 2021, was trading at $5.8 billion before the RBI order last week.
A group of founders in India recently wrote to the regulator and the Finance Ministry, warning that the central bank’s action could stifle innovation. Das said on Thursday that the Reserve Bank of India will “always encourage and support innovation and technology in the financial sector”.
The Reserve Bank of India plans to comment more on Paytm next week, officials said. The central bank has been weighing revoking Paytm Payments Bank’s license for the past few days, as TechCrunch first reported last week.
It has also weighed ordering a top management reshuffle at Paytm Payments Bank and removing some of the company’s executives from the banking unit, including Paytm founder Vijay Shekhar Sharma, according to three people familiar with the matter.
