The Paytm Crisis: RBI Could Review The Deadline
The RBI, on January 31, had come down on Paytm Payments Bank with restrictions leading to restrain on new deposits, top-ups and credit transactions after February 29, 2024. These restrictions were laid by the apex bank, noting non-compliance and material supervisory issues from the side of Paytm Payments Bank. People who knew more on this have said that, even though the RBI has not concluded with any final decision on the Paytm Payments Bank matter, it could re-consider the said deadline of Feb 29 in the coming week, if an acceptable number of customer deposits are not withdrawn. They also said that the RBI is not keen on a scenario where customers would be restricted to access to their money after February 29, reported the NDTV profit. It is also known that the apex bank is, of now, keeping a watch on the outflow of deposits, so as to decide the next move.
In the last ten days, in regard to the uncertainty surrounding the issue, the outflow of deposits has been slow. The regulator had found that the know-your-customer norms were not in compliance with the rules as more than one account was linked to same permanent account number, which could be used for money laundering. Some of these accounts has also undertaken transactions worth crores of rupees, leading again to the doubt of money laundering. Many accounts were found to be dormant too, which is suspected to be mule accounts. The regulatory bank has also found an inter-mingling of the financial and non-financial, i.e., of the parent Paytm and Paytm Payments Bank, which is also a matter of concern as both are to work differently.
The UPI transactions on the Paytm app may be affected from Feb 29, if a favourable review is not undertaken by the RBI as, Paytm’s UPI is led by the Paytm Payments Bank Ltd. (PPBL), which is the Payment Service Provider (PSP) on the Paytm, reported moneycontrol. The role of PSP’s is done by banks, and the PPBL, is the PSB channel which connects with the UPI app with the banking platform. If the PPBL is ordered to halt, it would no longer be able to act as the PSP to Paytm UPI app, which would bring issues to UPI transactions. Of now, the One 97 Communications, which holds the Paytm UPI app is not connected to any other commercial banks.
Paytm, founded by Vijay Shekhar Sharma is one of the major unicorn successes with almost 75 percent of gross merchandise value and a huge share of transactions from its UPI app. In UPI debit transactions, it has thirteen percent of market share and in credit transactions, it is around 20 percent. Ashneer Grover, the founder of BharatPe, in an interview given to the MirrorNow, called the RBI actions as an overreach and spoke of the need for legislations on such matters, reported the mint. He added that fintechs did not seem important, saying, “We have 111 unicorns but none of them is considered systemically important for the economy, but these startups have driven the 6-7.5 percent GDP growth rate that we celebrate. They have brought in maximum FDI in India and created a maximum number of jobs, but see zero legislative support and as they become big you see these public problems.”
Paytm, in its statements, has said that it”s management is continuing discussions with the RBI, so as to comply with the RBI directives on the matter. On February second, the CEO and founder of Paytm had reiterated the company’s dedication to the country and also said that the company valued the support and commitment of its users.
