Indian central bank defends “proportionate” action against Paytm


India’s central bank said Thursday it was taking supervisory measures and imposing trade restrictions only after “persistent non-compliance” with rules. His first comment after the crackdown on Paytm last week posed existential questions about the future of the leading financial services company.

Shaktikanta Das, Governor of the Reserve Bank of India, said the central bank always engages bilaterally with regulated entities and urges them to take corrective measures. If the central bank takes action, “it is always proportionate to the seriousness of the situation,” Das, pictured above, told a news briefing.

“All our actions, as a responsible regulator, are in the best interest of systemic stability and the protection of the interests of depositors or clients,” he added.

The Reserve Bank of India expanded its restrictions on payment bank Paytm, an associated entity of Paytm that processes transactions for the financial services group, prohibiting it from offering many banking services, including accepting new deposits and credit transactions across its services. The regulator clarified that the payments banks unit is the only entity with problems.

“This is a monitoring measure for persistent non-compliance,” RBI Deputy Governor Swaminathan J said at the press briefing. “Such action is invariably preceded by months and sometimes years of bilateral engagement during which we highlight deficiencies but also provide time for corrective action to be taken. As a regulator, it is our responsibility to protect the consumer,” he added.

Shares of Paytm fell 10% on Thursday, reducing 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 central bank action may hamper innovation. Das said on Thursday that the Reserve Bank of India would “always encourage and support innovation and technology in the financial sector”.

The Reserve Bank of India plans to comment further on Paytm next week, the officials said. The central bank has weighed the revocation of Paytm Payments Bank’s license In recent days, TechCrunch first reported it last week.

He also considered ordering a reshuffle of Paytm Payments Bank’s board and removing some company officials, including Paytm founder Vijay Shekhar Sharma, according to three people familiar with the matter.


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