RBI Imposes Restrictions on Paytm Payments Bank, BharatPe Co-founder Raises Concerns

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In a surprising move, the Reserve Bank of India (RBI) has imposed restrictions on Paytm Payments Bank, ordering it to cease accepting fresh deposits in its accounts and popular wallets after February 29, 2024. This decision has sparked concerns within the fintech community, with BharatPe co-founder Ashneer Grover expressing his dismay and asserting that such measures go against the interests of fintech firms.

RBI Imposes Restrictions on Paytm Payments Bank, BharatPe Co-founder Raises Concerns
RBI Imposes Restrictions on Paytm Payments Bank, BharatPe Co-founder Raises Concerns

In a surprising move, the Reserve Bank of India (RBI) has imposed restrictions on Paytm Payments Bank, ordering it to cease accepting fresh deposits in its accounts and popular wallets after February 29, 2024. This decision has sparked concerns within the fintech community, with BharatPe co-founder Ashneer Grover expressing his dismay and asserting that such measures go against the interests of fintech firms.

Mr. Grover, in a post, criticized the RBI’s decision, stating, “I don’t understand RBI. Clearly, RBI does not want fintechs in business. Of late all regulations/moves are against Fintechs. Such moves will kill the sector altogether.” He further called upon Finance Minister Nirmala Sitharaman and Prime Minister Narendra Modi’s office to intervene and investigate the matter.

The RBI directive specifically prohibits Paytm Payments Bank from accepting deposits or top-ups in any customer accounts, wallets, FASTTags, and other instruments after the end of this month. The central bank’s Chief General Manager, Yogesh Dayal, stated, “No further deposits or credit transactions or top-ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024, other than any interest, cashbacks, or refunds which may be credited anytime.”

However, the RBI clarified that the payment bank is permitted to credit interest, cashback, or refunds to customers as necessary. This move follows the revelation in the Comprehensive System Audit report and subsequent compliance validation report of external auditors, which highlighted persistent non-compliance issues, prompting the RBI to take further action.

The RBI had previously instructed Paytm Payments Bank in March 2022 to halt the addition of new customers. Despite this, the recent audit reports indicated continued non-compliance and supervisory concerns, leading to the decision taken under Section 35A of the Banking Regulation Act, 1949.

The fintech sector, often regarded as a crucial player in creating market capitalization and employment opportunities, is now facing increased scrutiny from regulatory authorities. The impact of these restrictions on Paytm Payments Bank, a significant player in India’s payment landscape, and the broader implications for the fintech industry, are yet to unfold. As stakeholders await responses from the Finance Ministry and the Prime Minister’s office, the future trajectory of fintech regulations in the country remains uncertain.

Sources By Agencies

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